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| Mike Hanrahan is a Mortgage Specialist with Plaza Mortgage in St Louis. |
Market Comment
Mortgage bond prices opened the week in positive territory and then gave back the gains following mixed data releases. Trading was up and down throughout the week but generally within a narrow range. Stronger than expected consumer sentiment data Friday ended the week on a slightly negative tone.
For the week, interest rates on government and conventional loans were near unchanged.
The employment report Friday will be the most important event this week. Look for potential volatility surrounding this release. ISM Index and factory orders data will also be important.
LOOKING AHEAD
|
Economic
Indicator |
Release
Date & Time |
Consensus
Estimate |
Analysis
|
| Construction Spending |
Monday, Oct. 2,
10:00 am, et |
Down 0.3% |
Low importance. An indication of economic strength. A significant decrease may lead to lower rates. |
| ISM Index |
Monday, Oct. 2,
10:00 am, et |
53.5 |
Important. A measure of manufacturer sentiment. A large decline may lead to lower mortgage rates. |
| Factory Orders |
Wednesday, Oct. 4,
10:00 am, et |
Unchanged |
Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Employment |
Friday, Oct. 6,
8:30 am, et |
Unemp. @ 4.7%,
Payrolls +120k |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| Consumer Credit |
Friday, Oct. 6,
3:00 pm, et |
Up $5.0 billion |
Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates. |
Play it Smart
As we all know, mortgage interest rates change on a daily and intra-day basis. With so much volatility, it is often difficult to make the right decision regarding floating or locking. What is important to remember is the fact that there is a difference between gambling and taking a calculated risk when making mortgage interest rate decisions. Floating into an economic release such as the employment report is usually a gamble. In addition, floating over a span of more than a few days is also a gamble. Unforeseen events can cause instability in the financial markets that results in mortgage interest rate gyrations. On the contrary, floating on a day of positive market movement with no economic data the following day, while such action is still vulnerable to market movements, can be considered a calculated risk.
Last week was a prime example why a cautious approach to float/lock decisions is necessary to protect against market movements amid the economic uncertainty in the US financial markets. Mortgage interest opened the week in positive territory. Unfortunately, the improvements were erased on Wednesday, Thursday, and Friday. Many consumers and mortgage professionals capitalized on the positive movements the beginning of the week by locking in loans before the negative movements the latter portion of the week.
The potential for mortgage interest rates to push lower is real considering the tremendous uncertainty of the US economy. However, interest rates could also rise. It is important to remember that interest rates tend to improve slowly while negative movements tend to happen fast and furiously. Capitalizing on interest rates at the current levels protects against uncertainty surrounding future interest rate developments. The important thing to remember is that mortgage interest rates remain historically favorable.
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