Mortgage Market Update June 9, 2009
Well, it’s Wednesday, May 27th and I’m cruising along at the office working out various underwriting issues working towards closing a bunch of loans because for the first time in over a year, I’m really busy! Oh happy day! Until today.
On the day I am writing about interest rates had been very stable in and around 5% on a 30 Year Fixed for a couple of months and it did not appear that anything was going to move the rate up for the foreseeable future. That assumption turned out to be very wrong. On May 26th our rate (30 Fixed) was 5.0% with zero points. The Treasury Bond market was a little jittery at the end of the day because the Federal Government was scheduled to be selling a bunch of new debt over the next couple of weeks and if the bond auctions were not well received by investors then the rate on these bonds would rise. An increase in Treasury Bond rates will cause mortgage rates to rise also. The billions of dollars in 5 Year Bonds the fed sold on the afternoon of the 27th were not very well received and by the end of the day, May 27th, mortgage rates had gone up to 5.5%. In one day – Ouch.
The next day I awoke feeling very positive that this little spike in rates was going to reverse itself over the next week or so. Then on the 28th Durable Goods Orders figures were released and orders were up 1.9% – much stronger than expected. Also, released were new claims for unemployment benefits which were smaller than expected. People buying more stuff and fewer people losing their jobs is good news for the economy’s future but bad news for interest rates. Interest rates go up when the economy is doing well and go down when things are bad. By the end of this day the rate was up to 5.75%.
Rates had gone up ¾ of a point in just a couple of days. Since then this rate has held as more positive economic news has been released. Personal incomes and Outlays (consumer spending) were reported at the end of the week and both were stronger than expected keeping rates pegged at the new higher level.
The good news – we may get out of this economic mess we’re in faster than anyone thought. The bad news – a stronger economy will keep mortgage rates above the super low levels that we had been seeing. Overall though, when you can get a 30 year fixed rate mortgage anywhere in the 5’s that is a really great rate to borrow at. We may see a slight pull back in rates in the near term but as the year progresses there is little doubt that interest rates will be rising some more. If you’re in the market to buy a home I suggest identifying a home to buy, making an offer and getting your rated locked in now. Happy house hunting!