Rate Lock Advisory

Wednesday, March 16th

WEDNESDAY AFTERNOON UPDATE:
This week’s FOMC meeting has adjourned with word that the Fed has left key short-term interest rates unchanged from their previous levels. This move doesn’t come as much of a surprise though. The general consensus had them not making another rake hike yet. The post-meeting statement did shed some light on a couple topics. One of those being the number of moves the Fed sees themselves making (compared to market predictions) this year. In their projections, they see the key Federal Funds rate being around .875% at the end of this year instead of the previous estimate of 1.375%. To get there from its current point, they would likely make two more upward moves instead of four. This can be decoded to mean the Fed is expecting to make fewer monetary policy moves the rest of the year than they previously thought due to a weaker economic outlook.

8/32

Bonds

30 yr - 1.94%

115

Dow

17,366

37

NASDAQ

4,766

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High

Positive

Federal Open Market Committee (FOMC) Statement

The Fed also revised their economic projections during this meeting, slightly changing the employment outlook and lowering the overall GDP growth. They also acknowledged that inflation was still below their desired rate of 2.0%, but actually lowered their outlook for it also. The changes and comments clearly signal the Fed is more concerned about future economic growth than they were when they made the first rate hike late last year.

High

Positive

Federal Reserve Statement

Since bonds and mortgage-related securities usually thrive in weaker economic conditions, the news has had a positive impact on this afternoon’s trading. The bond market has moved into positive territory as have the major stock indexes. Stocks are in rally mode now with the Dow up 115 points and the Nasdaq up 37 points. The bond market is currently up 8/32 (1.94%) which should cause many lenders to make an intraday improvement to rates of approximately .125 - .250 of a discount point. However, I am not all that impressed with the move in bonds and question whether it will hold. If you are seeing an improvement in rates since this morning’s pricing, closing within the next week and still floating a rate, I would seriously consider locking that rate.

Medium

Neutral

Fed Talk

Fed Chair Janet Yellen is currently in her post-FOMC press conference. There is a possibility of seeing her comments or answers affect trading, but I suspect we have seen the biggest move we are going to get today unless she says something significantly surprising.

High

Negative

Consumer Price Index (CPI)

We had three pieces of economic data posted this morning, most of which was unfavorable for mortgage rates. It started with February's Consumer Price Index (CPI) 8:30 AM ET that showed a 0.2% decline in the overall reading and a 0.3% rise in the core data. The core reading exceeded forecasts, raising concern about inflation at the consumer level of the economy. New Housing Starts were higher than predicted also. The good news came in the Industrial Production report mid-morning that revealed a 0.5% decline in output at U.S. factories, mines and utilities. Forecasts were calling for a 0.3% decline. These reports helped fuel a negative open for bonds and an increase in rates this morning.

Low

Unknown

Weekly Unemployment Claims (every Thursday)

Tomorrow has two more pieces of data scheduled, but neither are considered highly important. The first is last week’s unemployment figures at 8:30 AM ET. They are expected to show that 266,000 new claims for unemployment benefits were made last week, up from the previous week’s 259,000 initial claims. Rising claims indicate a softening employment sector, so the higher the number the better the news it is for mortgage rates. Although, since this is only a weekly report, it usually takes a wide variance from forecasts for it to influence mortgage pricing.

Low

Unknown

Leading Economic Indicators (LEI) from the Conference Board

The Conference Board will post its Leading Economic Indicators (LEI) for February at 10:00 AM ET tomorrow morning. This index attempts to measure economic activity over the next three to six months. It is considered to be moderately important, but likely will not have a significant impact on mortgage rates. Current forecasts are calling for a 0.2% increase, meaning it is predicting that economic activity will likely expand modestly in the coming months. A smaller than forecasted rise, or better yet a decline would be considered good news for the bond market and mortgage rates.

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... Lock 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.