Mortgage Rate Forecast for August 11, 2010 - Improving, or...?
Here are some of the events affecting mortgage rates today:
What Mortgage Backed Securities (MBS) Are Doing Today:
- The price of the FNMA 30-Year 4.0% MBS coupon opened at 102.47 this morning - the same as yesterday's close.
- At 9:30 AM, the 4.0% MBS coupon was trading at 102.72 - up 8/32 from its opening.
Remember, on mortgage backed securities (MBSs), as the price goes up, the yield comes down - and so do mortgage rates. I expect that mortgage rates will be as much as 0.250 points better in price this morning as compared to yesterday.
The reason for the large drop in MBS prices between yesterday's close and this morning's opening is today is roll-over (or settlement) day in the MBS market. In the TBA (for To Be Announced) MBS market, at the time a trade is made, buyers and sellers agree to a few specific terms like what coupon, the issuing agency (Fannie Mae, Freddie Mac, Ginnie Mae), size of trade, and a buy/sell price. However, the actual pools of loans are NOT exchanged at the time of this commitment. Instead, the MBS buyer and the seller make an agreement to complete the transaction at a later date. In the MBS market, this date is pre-determined - it is called settlement day.
Price Trend in Mortgage Backed Securities:
The chart below shows the price trend of the FNMA 30-Year 4.0% coupon over the past 30 days from 7-12-2010 to 8-11-2010:
Economic Reports, News, and Events Affecting Mortgage Rates Today:
- International Trade Report - the trade deficit increased in June to -$49.9 billion, much more than the expected -$42.5 billion trade deficit, and much more than the revised $42.0 billion trade deficit in May. The increase in the trade deficit is attributed to an increase in non-oil imports. The report had no impact on the mortgage market or mortgage rates this morning.
In other news, the Treasury Dept will be auctioning $24 billion in 10-Year Notes today. The Notes and Bonds are used to finance the massive government debt. If there is a strong demand for the Notes, we should see the bond and mortgage markets market move higher during afternoon trading which in turn lead to lower mortgage rates. However, a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader selling in the bond and mortgage markets. That in turn could lead to higher mortgage rates.
Trend in Mortgage Rates:
The chart below shows the trend in mortgage rates over the past 10 years:
Mortgage Rate Forecast:
Mortgage rates are at their historic lows. They haven't been this low since the early 1950s - and continue to go lower as the economic recovery slows. These low mortgage rates may be with us for some time. Usually, mortgage rates go up during the summer months during the peak home buying season, then go down as the fall and winter seasons approach. But these are not "normal times." It's possible that mortgage rates will continue to slowly fall. However, they could turn at any time - and will if future economic news shows that we're finally coming out of the recession.
If you're thinking about refinancing your mortgage and if these low mortgage rates make sense to you, then take advantage of them while you can. If you're happy with the mortgage rate being offered to you today and if you don't want to risk mortgage rates moving higher, then you should apply and lock in now. It's better to have locked when you should have floated than it is to float when you should have locked.
Are you in need of a mortgage to purchase a home? Or want to refinance an existing mortgage into a lower permanent fixed rate? Or want to take cash out of the equity of your home? Or consolidate debt and reduce the monthly bills? Then be sure to request a mortgage rate quote today!
