Mortgage Rates


Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com


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Wednesday, February 23, 2011


Rate markets started slightly weaker in prices this morning after the big declines in rates yesterday; the stock index futures a little better in pre-market trading, again after a huge selling binge yesterday. Not surprising after the moves yesterday that markets are starting as they are. The bond and mortgage markets remain torn; on one side a better economic outlook should be keeping interest rates from declining, while on the other the unsettled conditions in the Mideast and N. Africa are holding rates with safety moves into US treasuries. Traders in the bond market swing back and forth as news about the Mideast and the US economy twist perspectives moment to moment.

Over night the situation in Libya now has expatriates rushing to leave the country; after Qaddafi said yesterday he would fight to the last drop of his blood to remain in control. Current consensus is that Qaddafi won't survive more than a few more days, most of that view coming from Libyan leaders now in exile in France. Already 300 people killed in the protests with estimates as high as 1000, today the US is using a fairy to evacuate Americans, the U.K and South Korea have dispatched charter planes to rescue nationals from Libya, Turkey sent two passenger ferries and a military ship. Italy said it accepted requests from the U.K. and Serbia to use its air force bases to land planes carrying civilians. Crude oil prices continue to increase today; after increasing almost $5.00 yesterday this morning crude is up another $1.50 in early trading.

Saudi Arabia's king announced an $11B increase in spending on social security and housing in a move to quell any protests in the kingdom. In Bahrain tens of thousands marched in the capital, Manama, yesterday to call for more democracy and equal rights. Yemen’s President, who has ruled for more than 30 years, has been urged to quit by protesters who clashed with pro-government forces for a 12th straight day.

Mortgage applications increased 13.2% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending February 18, 2011. The Market Composite Index, a measure of mortgage loan application volume, increased 13.2% on a seasonally adjusted basis from one week earlier. The Refinance Index increased 17.8 percent from the previous week. The seasonally adjusted Purchase Index increased 5.1% from one week earlier. The unadjusted Purchase Index increased 9.6% compared with the previous week and was 6.9% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 1.9%. The four week moving average is up 1.6% for the seasonally adjusted Purchase Index, while this average is up 1.8% for the Refinance Index. The refinance share of mortgage activity increased to 65.7% of total applications from 64.0% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.6% from 6.0% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.00% from 5.12%, with points increasing to 0.97 from 0.85 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.28% from 4.34%, with points decreasing to 0.80 from 0.85 (including the origination fee) for 80% loans.

The stock market opened weaker again this morning following the beat down yesterday. Crude oil continues to increase, gold a little better but not much. After starting a little lower in price treasuries at 9:30 were trading unchanged from yesterday's closes. Mortgage prices unchanged at 9:30 but lenders that set pries at about 9:00 were seeing lower mortgage prices by 4/32 (.12 bp). The bond market today will take its direction from how the equity markets trade and any new news from Libya. Yesterday the 10 yr note and mortgages both hit their respective 40 day moving averages but did not break either. Rate markets vulnerable to movement in either direction, weaker equities should add more support; better equities today will push rate market prices lower. With the Mideast and Libya still huge hot spots we don't expect interest rate markets to experience much selling today, any improvements in rates will depend on how stocks trade today.

At 10:00 Jan existing home sales were expected down 0.6% to 5.25 mil units (annualized); as reported sales increased 2.7% to 5.36 mil units annualized. The inventory levels declined 5.1% to a 7.6 month supply based on sales in Jan. 37% of all sales in Jan came from distressed sales and investor buying. Still very weak housing markets but we like that investors are increasing purchases; if consumers don't want to buy investors will likely to continue. The initial reaction to the better data gave stock indexes a small boost but didn't change anything in the mortgage and bond market.

At 1:00 this afternoon Treasury will sell $35B of 5 yr notes, yesterday's $35B 2 yr note auction was so-so; not strong but just OK based on measurements of demand and the interest rate which was higher than what had been expected.