Rate Lock Advisory

Thursday, September 4th

Thursday’s bond market has opened in positive territory following mixed economic news. Stocks are flat with the Dow down 3 points and the Nasdaq up 12 points as many traders await tomorrow’s key economic release. The bond market is currently up 7/32 (4.18%), which should improve this morning’s mortgage rates by approximately .250 of a discount point.

7/32

Bonds

30 yr - 4.18%

3

Dow

45,268

12

NASDAQ

21,509

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Neutral

Fed Beige Book

Yesterday afternoon’s release of the Fed Beige Book didn’t give us any major surprises. The Fed’s regional business contacts painted a picture of slowing economic activity, particularly consumer spending as they try to balance rising costs. Most Fed districts reported inflation rising at a modest or moderate pace over the summer. Employment was also showing signs of slowing, but still was considered stable. This update covers the six weeks ending August 25th. Since there was little in it that the markets didn’t already know, it had a minimal impact on yesterday afternoon’s bond trading and mortgage pricing.

Medium

Positive

ADP Employment

The first of this morning’s four economic reports was August’s ADP Employment report at 8:15 AM ET. It revealed 54,000 new private-sector jobs were added to the economy last month, falling short of the 69,000 that was expected. This was also a smaller number than July’s revised 106,000, pointing to a slowing employment sector. As a sign of weaker than expected economic activity, we can label the report favorable for bonds and mortgage rates.

Medium

Positive

Weekly Unemployment Claims (every Thursday)

Last week’s unemployment figures that were posted at 8:30 AM ET showed 237,000 new claims for jobless benefits were made. Analysts were expecting to see 232,000 new filings after the previous week’s 229,000 initial claims. Rising claims are also an indication of the employment sector softening, allowing us to also consider this report good news for rates.

Low

Positive

Productivity and Costs (Quarterly)

Also released at 8:30 AM ET were revised 2nd Quarter Productivity numbers. They showed worker output rose to a 3.3% annual pace during the April through June months. This was a better rate than the initial estimate of 2.4%. Furthermore, the labor costs reading was revised from up 1.6% to up only 1.0%. The revisions means workers were more productive per hour worked than previously thought and employer labor-related costs were not as high either. Both changes fall in the good news column for mortgage pricing.

Medium

Negative

ISM Service Index

Today’s final piece of relevant data was the Institute for Supply Management’s (ISM) non-manufacturing index for August. This is also known as the service sector index. They announced a reading of 52.0 that was a bit higher than forecasts of 50.5 and an increase from July’s 50.1. The increase means surveyed service-sector executives felt better about business conditions last month than they did in July. This report is a sign of economic strength that makes it bad news for bonds and mortgage rates.

High

Unknown

Employment Situation

Closing out this week’s calendar will be August's Employment report at 8:30 AM ET tomorrow. This major economic report gives us detailed insight into the labor market, including the U.S. unemployment rate, number of new jobs added or lost and average hourly earnings. July’s report that was posted early last month caused quite a fuss in the markets and in Washington D.C. This version may do the same, especially since it is the last update of this report before the Fed meets for their FOMC meeting.

High

Unknown

Employment Situation

The ideal scenario for the bond market and mortgage rates is rising unemployment, a drop in the number of new payrolls and earnings to fall slightly. Analysts are expecting to see that the unemployment rate inched up from July's 4.2% to 4.3% and that 78,000 jobs were added during the month. The average earnings reading is forecasted to have risen 0.3% from July. Weaker than expected readings would be another warning sign the employment sector is in worse shape than thought and would be very good news for bonds and mortgage rates. However, if we get stronger than expected numbers, the odds of a Fed rate cut next month may drop and mortgage rates should move higher tomorrow.

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... Float 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.

Ameritrust Mortgage Associates,LLC (NMLS#167664)

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150 East Palmetto Park Road, Suite 800
Boca Raton, Florida 33432
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