Mortgage Rate Commentary 05/13/2009

Here's your Daily Commentary report compliments of Jeff Drew and Star Mortgage!

Wednesday’s bond market has opened in positive territory following a much weaker than expected Retail Sales report. The stock markets are showing sizable losses with the Dow down 159 points and the Nasdaq down 26 points. The bond market is currently up 14/32, which will likely improve this morning’s mortgage rates by approximately .125 - .250 of a discount point.

The Commerce Department reported this morning that sales at retail establishments fell 0.4% last month. This was much lower than the 0.1% decline that was expected and indicates that consumer spending is softening. Since consumer spending makes up two-thirds of the U.S. economy, today’s report hints that an economy recovery may not be as soon as some analysts had thought. That is good news for bonds and mortgage rates because slowing economic activity makes bonds and mortgage related securities more attractive to investors.

Tomorrow morning also brings us an important economic report with the release of April’s Producer Price Index (PPI). This index helps us measure inflationary pressures at the producer level of the economy. If it reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.1%, while the core data that excludes food and energy prices is also expected to rise 0.1%. A smaller than expected increase in the core data would be ideal for mortgage shoppers.

Also tomorrow will be the release of last week’s unemployment figures by the Labor Department. Last Thursday’s posting showed a sizable drop in new claims for unemployment benefits. Tomorrow’s release is expected to reveal 609,000 new claims were filed, which would be an increase of 8,000. However, this data is not nearly important as the PPI is and will likely not influence bond trading and mortgage rates unless it varies greatly from forecasts.

Friday brings us the release of three relevant reports, including the very important Consumer Price Index (CPI). The other two are moderately important to the markets, but the group of three combined can create a large amount of volatility in the markets if they reveal surprising results. But the CPI will be the primary report of the day.

If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now...
©Mortgage Commentary 2009


* Please note that if you have a mortgage rate and monthly payment you are comfortable with you may want to consider locking that rate. It is very difficult to predict the market in these very volatile times. Most lenders have a mortgage rate renegotiation policy. Contact me for details.