Rate Lock Advisory

Tuesday, August 25th

Tuesday’s bond market has opened in positive territory following another decline in oil prices that ease inflation concerns a bit. Stocks are also in positive ground with the Dow up 71 points and the Nasdaq up 131 points. The bond market is currently up 10/32 (4.65%), which should improve this morning’s mortgage rates by approximately .250 of a discount point.

10/32

Bonds

30 yr - 4.65%

71

Dow

53,488

131

NASDAQ

26,112

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium

Positive

Consumer Confidence Index

The Conference Board, who is a New York-based business research group and not a governmental agency, announced late this morning that their August Consumer Confidence Index (CCI) stands at 89.4. This was a decline from July’s revised 90.2 and lower than forecasts of 90.6. The lower readings mean surveyed consumers were less confident in their own financial situations over the past two months than previously thought. Since waning confidence usually translates into softer consumer spending that makes up a huge part of the economy, we can label the report as favorable for mortgage rates.

Low

Positive

New Home Sales

July’s New Home Sales report was also released at the same time, revealing a 10.5% drop in sales of newly constructed homes compared to June’s upwardly revised number. June’s large increase skews July’s percent drop in sales. The actual number of new home sales last month were much closer to estimates despite the headline of a 10.5% decline. Still, weaker home sales make it harder for the broader economy to grow. Therefore, the report is slightly good news for the bond market even though it hasn’t had an influence on this morning’s mortgage rates.

Medium

Unknown

Personal Income and Outlays

Tomorrow is the busiest day of the week and most important for mortgage rates with three major economic reports scheduled for release, all at 8:30 AM ET. The most influential of the batch is July’s Personal Income and Outlays report. It helps us measure consumer ability to spend and current spending habits. Forecasts show a 0.2% rise in income and a 0.1% increase in spending. Since consumer spending makes up such a large portion of the U.S. economy, weaker than expected numbers would be considered good news for the bond market and mortgage rates.

High

Unknown

Inflation News

While the namesake readings of tomorrow’s first release will draw a little attention, what makes that report so important to the markets are key inflation readings (PCE and Core PCE indexes) within the data that the Fed relies heavily on during their FOMC meetings. This will be the last release of the PCE readings before next month's FOMC meeting, meaning they may affect how the Fed votes what to do with short-term interest rates. Analysts are expecting to see a 0.1% increase in the overall July PCE and a 0.2% increase in the more influential monthly Core PCE. Favorable news for rates would be a noticeably slower pace of inflation, particularly in the annual readings.

Medium

Unknown

GDP Rev 1 (month after initial)

Next up the first revision to the 2nd Quarter Gross Domestic Product (GDP) reading. The GDP is the total of all goods and services produced in the U.S., making it the best benchmark of economic growth or contraction. This reading is the second of three that we see each quarter. Last month's preliminary reading revealed that the economy grew at an annual rate of 1.5%. Tomorrow's update is expected to show the same rate. A minor upward or downward adjustment won't have much of an impact on the markets or rates since the data is a bit aged at this point. That said, a stronger economy usually makes bonds less appealing to investors, leading to higher mortgage rates.

High

Unknown

Durable Goods Orders

July's Durable Goods Orders report is the final relevant report set for release tomorrow morning. This data tracks orders at U.S. factories for big-ticket items, or products that are expected to last three or more years such as appliances, electronics and airplanes. Predictions show an increase of 0.5% in new orders, pointing to slightly stronger manufacturing activity last month. This data is known to be quite volatile from month to month, so a minor variance from expectations doesn't necessarily raise too much concern about the economy. A secondary reading that excludes more volatile transportation-related orders is expected to rise 0.6%. Declines would be good news for the bond and mortgage markets, but we can expect the inflation readings to draw the strongest response tomorrow morning.

Low

Unknown

Treasury Auctions (5,7,10,20,30 year)

We also have the results of tomorrow’s 5-year Treasury Note auction to watch for. This sale won't directly impact mortgage pricing because they are short-term securities and mortgage rates are based on long-term debt, but it can influence general bond market sentiment. If the 1:00 PM ET results announcement indicates a weak interest in the securities, we could see weakness in the broader bond market. A strong demand from investors would be good news and may lead to a modest improvement to mortgage pricing tomorrow afternoon.

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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