Rate Lock Advisory

Friday, September 4th

Friday’s bond market has opened in negative territory following stronger than expected economic news. Stocks are looking to close the week on a negative note, pushing the Dow lower by 264 points and the Nasdaq down 16 points. The bond market is currently down 2/32 (4.77%), which is actually respectable considering the surprisingly strong data. This should lead to an increase of approximately .125 of a discount point in this morning’s mortgage rates.

2/32

Bonds

30 yr - 4.77%

264

Dow

53,421

16

NASDAQ

26,560

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High

Negative

Employment Situation

Today’s big news was the release of August’s governmental Employment report at 8:30 AM ET that showed the unemployment rate held at July’s 4.1% and that 162,000 jobs were added to the economy last month. This was significantly higher than the 56,000 that was expected. Furthermore, July’s payroll number was revised from a loss of 23,000 to positive 21,000 and 11,000 more were added to June’s payrolls, meaning those two months were stronger than previously thought also.

Medium

Negative

Employment Situation

Another key reading in the report that bonds are sensitive to is the average hourly earnings change. Earnings rose 0.3% last month, as expected. However, the year-over-year rate moved from 3.0% to 3.1%. Rising wages allow consumers to have more money to spend and also causes their employers to raise the cost of their products and/or services, contributing to inflationary pressures in the economy.

High

Unknown

Misc Fed

This morning’s report is clearly bad news for bonds and mortgage rates. Besides pointing to economic strength that makes bonds less appealing to investors, it also gives the Fed a bit more room to raise key short-term interest rates sooner than later to help bring inflation down. If the employment sector showed signs of weakness, it would be harder for the Fed to make such a move since it could have a negative impact on employment.

High

Unknown

Inflation News

Next week is shortened due to Monday’s Labor Day holiday that has the markets closed for the day. The number of economic reports and other scheduled events that may affect mortgage rates is few, but they include two highly important inflation indexes late in the week. There are also a couple of long-term Treasury auctions that have the potential to move rates during afternoon trading midweek. Look for details on all of next week’s activities in Sunday evening’s weekly preview.

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.