Rate Lock Advisory

Thursday, February 2nd

Thursday’s bond market has opened in positive territory to extend yesterday’s post-FOMC rally. Stocks are mixed with the Dow down 138 points and the Nasdaq up 233 points. The bond market is currently up 10/32 (3.38%), which should lead to another improvement in mortgage rates. Most lenders issued at least one intraday improvement in pricing late yesterday afternoon. After all the possible revisions, this morning’s rates should be approximately .500 of a discount point lower than Wednesday’s early pricing.

10/32


Bonds


30 yr - 3.38%

138


Dow


33,954

233


NASDAQ


12,047

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium


Positive


Productivity and Costs (Quarterly)

Employee Productivity and Costs data showed an increase in worker output of 3.0%, exceeding estimates of 2.5%. A secondary reading that tracks labor costs came in below forecasts. Both readings are favorable for bonds and mortgage rates.

Medium


Negative


Weekly Unemployment Claims (every Thursday)

Last week’s unemployment update showed only 183,000 new claims for benefits were made, down from the previous week’s 186,000. Analysts were expecting to see over 200,000 initial filings. The decline is a sign of strength in the employment sector, making the data negative for rates. Fortunately, this is only a weekly snapshot, preventing a stronger bond reaction to the news.

Medium


Positive


Factory Orders

December's Factory Orders data took us back to favorable news for rates. The Commerce Department announced a 1.8% increase in new orders at U.S. factories. This was a bit softer than the 2.2% that was predicted, hinting the manufacturing sector was not as strong as thought. Accordingly, we can label this report slightly favorable for bonds and mortgage pricing.

High


Unknown


Employment Situation

Tomorrow morning brings us the almighty monthly governmental Employment report. Some of the highly relevant portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings change. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a much smaller increase in payrolls than expected and little or no rise in earnings. Current forecasts are calling for an unemployment rate of 3.6% (up 0.1%) and approximately 190,000 new jobs added to the economy while earnings rose 0.3%. Stronger than expected numbers will likely fuel a stock market rally and selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers should lead to a noticeable improvement in mortgage pricing.

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.