Mortgage rates moved a few basis points lower yesterday after the  bond market experienced what AQ and MG refer to as a "forced rally". Stocks were selling the dollar was stronger and the market was generally nervous about a weak Jobs report after Goldman Sachs revised their Non Farm Payrolls forecast for the worse. This equation resulted in a heavy flight to safety rally in the fixed income market which essentially snowballed as market participants looked to keep up with rapidly appreciating prices. As a result, mortgage backed securities prices closed at levels not seen since May.  Following the rally in Treasury and MBS markets, lenders republished rate sheets for the better and consumer borrowing costs fell.  There were even few lenders offering 4.5% for 30 year mortgages for consumers with exceptionally high FICO scores and low loan to values. This all occurred in anticipation of today...

The U.S. Department of Labor this morning released the monthly Employment Situation report. This data provides four key measures on the strength of the  domestic labor market...

The first is a read on the number of jobs lost or created from the prior month.  Recent reports have shown that job losses have begun to moderate since peaking in January 2009.  Economists surveyed for this month’s report were calling for 175,000 job cuts following last month’s read of 201,000 losses.

The next measure is the official unemployment rate which was expected to post a increase from last month’s read of 9.7% to 9.8% in September. 

The final two measures are the average hourly earnings and work week.  Average hourly earnings was expected to post a 0.2% increase while the average work week was expected to hold steady at 33.1 hours.  These final two measures are important because if wages are going down or if hours worked decreases, consumers will have less money to spend. 

The Labor Department reported that our economy lost a worse than expected 263,000 jobs last month. The official unemployment rate came in right on expectations at 9.8%, which is a 26 year high.   Average hourly earnings only posted a 0.1% increase while the work week shrank to 33.0 hours, matching a record low.

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This wasnt the only data published this morning. The U.S. Department of Commerce released monthly factory orders data. This report tracks the dollar amount of new orders for both durable and non durable goods.   If orders are increasing, it can signal that factories will be busy in the months ahead as they fill new orders...which can imply firms may begin hiring to avoid falling behind.  Economists surveyed expected factory orders to post a rise of 1.0% following last month’s1.3% increase, which was the biggest jump since last summer.  Today's report showed that factory orders plunged 0.8% last month, far worse than expectations.

Today's weak jobs report confirmed yesterday's rally in the MBS market (which  helped push mortgage rates lower). This morning, MBS prices continued to rally after the NFP data was released, however as the day has progressed MBS have given back this morning's gains and a few lenders have even repriced for the worse.   AQ and MG cite this loss of momentum as a factor of yesterday's rally. To keep it simple, the weak labor market data was built into prices yesterday.  So while prices have fallen from today's intraday highs, the rates market is trading very close to yesterday's closing levels, allowing lenders to continue to offer mortgage rates near four month lows.

Reports from fellow mortgage professionals indicate the par 30 year conventional mortgage rate has dipped  to 4.5% to 4.75% range for the best qualified.  To secure a par rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.  If you are seeking a 15 year fixed rate, you can expect a par rate from 4.00% to 4.25%.

There is a saying about making lock float decisions: lock the highs and float the lows. Buy low sell high! Currently MBS prices are very close to their highest  levels ever.   If you are floating, strongly consider locking today. Take advantage of the great rates that we are seeing.  Additionally, if you have locked your loan in the past couple weeks, call your mortgage professional about a float down.  This is where the lender will lower your interest rate despite it already being locked.  Most lenders offer this as a way to discourage you from pulling your loan and going with a new lender.

I hope everyone has a great weekend and feel free to ask questions in the comment section below.