Mortgage Rates



The interest rate markets weaker again this morning; not surprising with the FOMC policy statement and Bernanke’s press conference this afternoon. The 10 yr note at 9:00 at 2.00% after another push down to close to its strong resistance at 1.90% (the low in this run lower, 1.92%). Mortgages of course are also lower in price, down 3/32 (.09 bp) frm yesterday’s close.

At 8:30 March durable goods orders were much weaker than forecasts; down 4.2% overall against estimates of -1.9%; ex transportation orders, expected up 0.5% were down 1.1%. The decline in orders was the largest month to month since January 2009. There was no noticeable reaction to the weak data in the stock market that was trading better. The US and Europe’s key stock markets are rallying nicely today. In the US the key indexes up driven by Apple’s Q1 report late yesterday, this morning in pre-opening Apple stock up over 50 points and the NASADAQ up 53 on the strong earnings report.

Although Europe’s equity markets are better today, the debt crisis and declining economy in the region are still alive and well. The decisions from the EU, ECB, and IMF to drive austerity and massive spending cuts is showing increasing signs that to achieve those goals will push Europe into a deeper and longer recession and eventually defaults. As long as the situation in Europe continues as it is now, US treasuries won’t increase much as safety moves to the US will continue to support low rates. In the Netherlands the government has collapsed as those austerity goals can’t be met; the entire government resigned. Previously while Greece was the poster child the Netherlands was a strong supporter for massive cuts I government spending and deep austerity on payrolls and job cuts; the country failed to meet the objectives it championed when Greece was the target.

This afternoon at 2:15 we will get the FOMC policy statement followed by Bernanke’s press conference. Unlikely the US financial markets will see much change between now and then. The issue with the Fed; another QE signal from the Fed? We don’t expect the Fed will actually announce an easing move but if Bernanke holds course he will hang out the carrot based as always on the economic climate going forward. Most of the recent decline in rates is attributable to the escalation of the crisis in Europe with some of it driven by a weaker economic outlook that prevails at the present time.

US mortgage rates set record lows last week. The MBA Market Composite Index decreased 3.8% on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 5.6% from the previous week, with the Conventional Refinance Index decreasing by 6.1% and the Government Refinance Index decreasing by 2.1%. The seasonally adjusted Purchase Index increased 2.7% from one week earlier. The refinance share of mortgage activity decreased to 73.4% of total applications from 75.2% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.6% from 5.3% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.04% from 4.05%, with points decreasing to 0.40 from 0.45 (including the origination fee) for 80% loans. This is the lowest 30-year fixed interest rate recorded in the history of the survey. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.27% from 4.36%, with points increasing to 0.44 from 0.36 (including the origination fee) for 80% loans. This is the lowest 30-year jumbo interest rate recorded since MBA started tracking the series in January 2011. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.81% from 3.83%, with points decreasing to 0.52 from 0.61 (including the origination fee) for 80% loans. This is the lowest FHA interest rate recorded in the history of the survey. The effective rate decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.32% from 3.33%, while points remained unchanged at 0.41 (including the origination fee) for 80% loans. This is the lowest 15-year fixed interest rate recorded in the history of the survey.