Mortgage Rate Forecast for June 3, 2010

Mortgage Rate Forecast for June 3, 2010

Here are some of the events affecting mortgage rates today:

What Mortgage Backed Securities Are Doing Today:

• The price of the FNMA 30-Year 4.5% MBS coupon opened at 102.09 this morning - the same as yesterday's close.
  
  
• At 9:30 AM, the 4.5% MBS coupon was trading at 101.91 - down 6/32 from its opening

Remember, on mortgage backed securities (MBSs), as the price goes down, the yield goes up - and so do mortgage rates. I expect that mortgage rates will be up to 0.250 points worse in price this morning as compared to yesterday.

Price Trend in Mortgage Backed Securities:

The chart below shows the price trend of the FNMA 30-Year 4.5% coupon over the past 30 days from 5-4-2010 to 6-3-2010:

Economic Reports, News, and Events Affecting Mortgage Interest Rates Today:

• ADP Employment Report - 55,000 private non-farm jobs were created in May, less than the upwardly revised 65,000 jobs that were created in April. However, this report had no impact on mortgage rates this morning.
  
  
• Jobless Claims - 453,000 new claims for unemployment were filed last week, and 3,000 more than expected, but 7,000 less than the previous week. The four-week average for unemployment is up by 2,500 to 459,000. Continuing claims for the week of May 22 is also up 31,000 to 4.666 million. All signs indicate the economy has been recovering of late but without much of an increase in jobs. This data is usually not considered to be very important to the mortgage market and had no effect on mortgage rates this morning.
  
  
• Non-farm Productivity and Cost Index - is up 2.8% for the 1st quarter of 2010, which is lower than the previous estimate of 3.6%, and follows a 6.9% increase in the 4th quarter of 2009. Labor costs fell 1.3%, which follows a 5.9% drop the previous quarter. This shows that companies are slowly bringing people back to work. However, the report had no impact on the mortgage market or mortgage rates this morning.
  
  
• Factory Orders - rose 1.2% in April, less than the 1.8% rise that was expected, and follows a revised 1.7% increase the previous month. This shows that overall, the manufacturing sector is improving. This report is similar to the Durable Goods Orders report that was released late last week, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. This report had no impact on the mortgage market or mortgage rates this morning.
  
  
• Institute for Supply Management's (ISM) Non-Manufacturing Index - growth in the non-manufacturing sector is remains unchanged in April with a reading of 55.4 in the overall index. A reading above 50 indicates manufacturing sector expansion rather than contraction. The new orders component fell to 57.1, but remains strong. This report indicates that the economic outlook looks good as there appears to be steady growth for most of the nation's economy. However, this report had no impact on mortgage rates this morning.

In other news, the Treasury Dept will announce later this morning the terms of the Notes and Bond auctions scheduled for next week. The Notes and Bonds are used to finance the massive government debt, and the results of these auctions could affect mortgage rates next week.

Trend in Mortgage Rates:

The chart below shows the trend in mortgage rates over the past year:

Mortgage Rate Lock Advice:

Mortgage rates are no longer at their lows of 2010. On yesterday, the price of the FNMA 30-Year 4.5% Coupon closed within 60 basis points of its all-time high of 102.69 which was on November 30, 2009. This morning, the MBS coupon was within 78 basis points of that all-time high. As a comparison, what that means is this: if a 30 year fixed mortgage rate was 4.875% with no points yesterday, and if price of the MBS 4.5% coupon were to go as high as 102.69, then the best the 30 year fixed mortgage rate would be is 4.75% with 0.250 point today.

Mortgage rates were already at their lows for 2010. While it's still possible that mortgage rates could go lower again with the ongoing economic crisis in Europe as well as the housing market crisis in China, it won't be by much, and I would not risk the chance waiting for it.

If I was closing within the next 5 - 7 days, I would lock in the rate.

If you are closing in more than 7 days, send me an email to get my rate lock advice.

Be sure to check out today's mortgage rates.