Rate Lock Advisory

Thursday, May 26th

Thursday’s bond market has opened in positive territory following favorable economic news. Despite the economic headlines, stocks are showing early gains of 444 points in the Dow and 169 points in the Nasdaq. The bond market is currently up 3/32 (2.74%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.



30 yr - 2.74%







Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock



Treasury Auctions (5,7,10,20,30 year)

Yesterday’s 5-year Treasury Note auction was uneventful with the benchmarks used to gauge investor demand showing an average level of interest in the securities compared to other recent sales. Bonds had little reaction to the results announcement, preventing a change in mortgage rates. Demand for those securities cause us to be a bit pessimistic about today’s 7-year Note sale. Results of this sale will be posted at 1:00 PM ET, making it an early afternoon event for rates. A strong demand from investors could lead to a slight intraday improvement to rates later today. On the other hand, a lackluster interest may hurt bonds enough for some lenders to issue an intraday rate increase before closing.



FOMC Meeting Minutes

Also yesterday afternoon was the release of the minutes from the May 3rd/4th FOMC meeting. They didn’t reveal any major surprises, but did confirm that the Fed is highly likely to move key short-term interest rates higher by .500 of a point at each of the next two FOMC meetings (June 14-15 and July 26-27). Those moves were expected by many analysts to help get inflation under control, which is running at its strongest level in 40 years. Rising inflation erodes the value of a bond’s future fixed interest payments, making them less appealing to investors. This is why bond yields and mortgage rates move higher when headlines show signs of stronger inflation. However, since these minutes told us something that traders already assumed, we saw almost no reaction to their 2:00 PM release yesterday.



GDP Rev 1 (month after initial)

Today’s fairly important economic news was the first revision to the 1st quarter Gross Domestic Product (GDP) reading at 8:30 AM ET. It showed that the economy contracted at a 1.5% annual pace during the first three months of the year. This was a downward revision from the negative 1.4% rate that was estimated in last month’s initial reading. Since stocks usually move lower and bonds are more appealing to investors during weaker economic times, we can label this news as favorable for mortgage rates.



Weekly Unemployment Claims (every Thursday)

Also posted early this morning was last week’s unemployment update that indicated 210,000 new claims for benefits were filed during the week. That number pegged expectations, preventing it from having an impact on this morning’s mortgage pricing.



Personal Income and Outlays

Tomorrow has two reports set for release, starting with April's Personal Income and Outlays data at 8:30 AM ET. This Commerce Department report gives us an indication of consumer ability to spend and current spending habits. A decline in income means that consumers have less money available to spend. Since consumer spending makes up over two-thirds of our economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts are showing a 0.5% increase in income while spending is expected to have risen 0.6%. This report also has the core PCE index in it that the Fed relies heavily on as a gauge of inflation. Weaker numbers would be considered good news for bonds and mortgage rates, especially if the PCE index moves lower.



Univ of Mich Consumer Sentiment (Rev)

The last mortgage-related data of the week will come from the University of Michigan at 10:00 AM ET tomorrow when they update their Index of Consumer Sentiment for May. This type of data is watched fairly closely because when consumers are feeling more confident about their own financial situations, they are more likely to make a large purchase in the near future. Rising confidence and the higher levels of spending that usually follow are considered negative news for bonds and mortgage rates. Tomorrow's report is expected to show little change from this month's preliminary reading of 59.1. A higher reading would be considered bad news for bonds and mortgage pricing, while a large downward revision should help boost bond prices and lead to a slight improvement in rates.



Holiday Schedule

Also worth noting about tomorrow is the early close for the bond market ahead of next Monday's Memorial Day holiday. The bond market will close at 2:00 PM ET tomorrow while stocks trade for a full day. All markets will be closed the following Monday for the holiday. We sometimes see a bit of volatility in bonds in these situations as traders look to protect themselves over the three plus day weekend.

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.