Rate Lock Advisory

Thursday, August 17th

Thursday’s bond market has opened flat again following mixed economic news. The major stock indexes are showing noticeable losses of 87 points in the Dow and 29 points in the Nasdaq. The bond market is currently up 1/32 (2.22%), but strength late yesterday should cause this morning’s mortgage rates to be slightly better than Wednesday’s morning pricing.

1/32


Bonds


30 yr - 2.22%

87


Dow


21,937

29


NASDAQ


6,315

Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock

Medium


Positive


Federal Open Market Committee (FOMC) Minutes

Yesterday’s afternoon release of the FOMC minutes did give us a little surprise. The biggest point taken from them was that the Fed appears to be much more divided on when and if another rate hike should be made. The fact inflation is lagging well below the Fed’s preferred annual rate of 2.0% has some Fed members questioning if a move should be made. The other side of the debate is that when inflation does rise to expectations, waiting too long to raise rates could be detrimental to the economy. This was good news for bonds and mortgage rates as FOMC rate increases tend to be taken as a sign of economic strength that hurts bonds prices and drives mortgage rates higher. As one would expect, the news did cause bonds to improve late yesterday, leading to many lenders improving pricing slightly before the end of the day.

Low


Negative


Weekly Unemployment Claims (every Thursday)

The first of this morning’s three economic reports was last week’s unemployment figures at 8:30 AM ET. They revealed that 232,000 new claims for unemployment benefits were filed last week. This was a decline from the previous week’s 244,000 initial filings and lower than the 240,000 that was forecasted. Because falling claims hints at a strengthening employment sector, this was bad news for bonds and mortgage rates. Fortunately, it is only a weekly report, so its impact on today’s trading has been minimal.

Medium


Positive


Industrial Production and Capacity Utilization

July's Industrial Production report was posted at 9:15 AM ET, showing a 0.2% rise in output at U.S. factories, mines and utilities. That was slightly weaker than the 0.3% increase that was expected, meaning the manufacturing sector may not be as strong as thought. However, since this is only a moderately important report with a slight variance, we haven’t seen much of a reaction to its results.

Low


Neutral


Leading Economic Indicators (LEI) from the Conference Board

The final report of the day was July’s Leading Economic Indicators (LEI) from the Conference Board. They announced a 0.3% rise in the LEI, matching forecasts. The increase means they are predicting slight economic growth over the next several months. As with today’s other data, we have not seen a reaction to this report.

Medium


Unknown


University of Michigan Consumer Sentiment (Prelim)

Tomorrow has only one economic report that we will be watching and it is also considered to be moderately important. The University of Michigan will post their Index of Consumer Sentiment for August late tomorrow morning. It will give us an indication of consumer confidence, which projects consumer willingness to spend. If a consumer's confidence in their own financial and employment situation is rising, they are more apt to make large purchases in the near future. But, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a reading of 94.0 that would mean confidence was stronger than July's level of 93.4. That would be considered slightly negative news for bonds and mortgage rates. Good news for mortgage shoppers would be a sizable decline in the index.

Float / Lock Recommendation

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.