Refinance Rates 

On Monday, March 22, mortgage pricing dropped on news of the passage of health care reform in the US House of Representatives. Taking out the uncertainty surrounding provisions of the bill caused health care stocks and the market in general to improve. Expect mortgage pricing to drop by 0.125 of a discount point. If refinancing a mortgage or buying a home, consider locking your interest rate if closing in the next 30 days.

On Friday, March 19, bond and mortgage-backed securities (MBS) pricing was down slightly with no relevant economic data to influence trading. While most mortgage product pricing worsened by about 0.250 of a discount point and reversed earlier improvements, interest rates on 5/1 hybrid ARM mortgages scaled back to levels not seen for some time--Thursday's 0.05% rate drop was followed by an additional 0.02% decrease Friday. If you are refinancing a mortgage or purchasing a new home, consider a 5/1 mortgage with an interest rate about 1% lower than that of the 30-year fixed home loan.

Mortgage interest rates declined slightly following three days of Treasury auctions. Demand was robust and allayed fears about international appetite for US debt. Despite last month's stormy weather, February's Industrial Production report posted a small gain of 0.2%, up from the zero percent expected by analysts. This is considered good for the economy but bad for mortgage interest rates. If closing on a mortgage in the next 60 days, consider locking your interest rate. Rates have been trending higher over the last 10 days.

Refinancing a mortgage or buying a new home? Loan interest rates ended the week slightly higher, as favorable unemployment data (unexpectedly, the unemployment rate held at 9.7% and only 36,000 jobs were lost in February 2010) caused stock prices to move up and bond prices to drop. Lower prices on bonds and mortgage-backed securities cause mortgage interest rates to increase. Friday's mortgages cost 0.125% more than Monday's. The recommendation is to lock interest rates if you have a mortgage in process at this time.

After several days of interest rate increases, mortgage interest rates improved February 23 when the Consumer Confidence Index dropped unexpectedly and steeply. After several months of increasingly optimistic figures, today's index came in at a shockingly low 46, following last month's 55.9--the lowest figure in 10 months. This caused a sell-off in stocks and mortgage-backed securities prices to increase, causing an easing in mortgage interest rates--about a 0.250 improvement in discount points for a 30-year fixed rate loan.

After several days of interest rate increases, mortgage interest rates improved February 23 when the Consumer Confidence Index dropped unexpectedly and steeply. After several months of increasingly optimistic figures, today's index came in at a shockingly low 46, following last month's 55.9--the lowest figure in 10 months. This caused a sell-off in stocks and mortgage-backed securities prices to increase, causing an easing in mortgage interest rates--about a 0.250 improvement in discount points for a 30-year fixed rate loan.

Early in the week, mortgage rates are holding fairly steady in spite of losses in the equities markets. The Institute for Supply Management published its services index Wednesday, February 3--it showed a reading of 50.5, slightly lower than expected. This news would be positive for mortgage interest rates, but the report isn't considered important enough to have a large effect. No major news is scheduled until Friday's monthly employment report, which could potentially push rates around. Recommendation: locking mortgage refinance and or home purchase loans, as there is little upside potential in floating.

Those refinancing a home loan may want to hold off--thin trading has made the bond and mortgage-backed securities (MBS) markets a bit jittery and subject to arbitrary pressures. The Treasury Department will auction $118 billion of 2-, 5-, and 7-year bonds next week, and some experts are worried that slim demand for the notes will increase rates in another holiday-shortened week. Benchmark 10-year Treasury notes were yielding 3.80% on the 24th. The notes were set for the worst weekly losses in four weeks and the worst monthly performance since January. The short-term outlook is bumpy, so we don't recommend locking in a rate unless you have to close soon.

On January 25, the National Association of Realtors reported that home resales plunged 16.7% in December 2009. The surprising drop indicates economic instability, normally good news for mortgage rates. This is being offset by stock market gains, and bonds are currently down; there should be an increase in mortgage rates of approximately 0.125 to 0.250 of a discount point. For those refinancing a mortgage or getting a new home loan, the remainder of the week brings more economic reports, and it should be a volatile week for mortgage rates. There are six more important economic reports scheduled, plus Treasury auctions and a Federal Open Market Committee (FOMC) meeting.

Good news for the economy, bad news for home loan interest rates. Durable goods orders were unexpectedly up, and new unemployment claims last week dropped. The Treasury auction of 7-year notes went very well, with high demand, but that wasn't enough to drop mortgage interest rates. If you're refinancing and haven't locked an interest rate, keep an eye on tomorrow's reports: the important fourth-quarter Gross Domestic Product (GDP) growth estimate and Employment Cost Index (ECI) and the revised reading to the University of Michigan's Index of Consumer Sentiment.

If you're getting a new home loan or refinancing a mortgage this week, you'll have a four-day week and probably light trading in the financial markets. This has the effect of increasing the volatility of the mortgage-backed securities market; if rates drop precipitously, call your mortgage lender and lock your loan. The week is pretty light in terms of economic data releases that could affect rates. There is only one major report scheduled, and it comes the middle part of the week. The markets will be closed Monday in observance of the Martin Luther King, Jr. holiday.

Rates improved slightly Monday, as stocks had a mixed trading session. For the second week in January, there are a number of important economic reports and Treasury auctions. For the rest of the week, here is the reporting schedule. As always, news that is bad for the economy tends to be good for new home loan and mortgage refinance rates, and good financial news is bad for mortgage rates.

Tuesday

• International trade
• $40 billion 3-year Treasury notes up for auction

Wednesday

• MBA Mortgage Applications Index
• $21 billion 10-year Treasury notes up for auction

Thursday

• Retail sales
• Jobless claims
• $13 billion 30-year Treasury bonds up for auction

Friday

• Consumer Price Index
• Industrial production
• Consumer sentiment

Mortgage-backed securities (MBS) opened lower early in the week in anticipation of January 8th's employment data release. Two smaller reports offered what may be a preview--and a happier employment picture than anticipated. Automatic Data Processing (ADP) reported that non-government employers unloaded 84,000 jobs in December--the fewest since March 2008. And outplacement firm Challenger, Gray, & Christmas indicated that 45,094 job cuts took place in December, the lowest since December 2007. Positive economic reports tend to send MBS prices lower and mortgage interest rates higher. Those refinancing a mortgage should keep in contact with their loan officer this week.