In A Word:

The data from scheduled economic reports is slightly better than expected this morning which is causing some worsening to mortgage rates.  Remember, a stronger than expected economy builds faith in the stock market and other growth dependent investments.  So as traders move their money out of the securities that back mortgages (MBS - mortgage backed securities), those who hold them must lower their price in order to sell.  A lower price on these MBS creates higher mortgage rates.

To Lock or Float?

If the decision must be made today, locking looks more favorable today than yesterday.  However, since prices have been dropping this morning, and since a majority of the data was against us, lenders may account for this risk by pricing slightly worse than they can afford to.  This means, that if the markets merely hold steady, we may see mid-day rate improvements.  A much bigger factor as far as impact on mortgage rates will be this Friday's employment numbers.  If you firmly believe that the report will show a higher than expected 60,000 job loss, then floating is your risk.  Historically rates are still good at these levels, so locking is not a bad choice.  If rates get worse on Friday, the change has potential to be significant.  If you have the ability to lock quickly when you decide, floating can make sense today if you diligently watch the stock market.  If you see a significant rise in stocks, check back on the "Professional" version of this blog for mid-day price changes.

 See Rates from Lenders in Your Area

The Numbers:

Yet again, the best qualified borrowers should be able to get a 30 year fixed mortgage in the high 5% range

The News:

  • ADP Employment
    • As mentioned, the ADP report actually shows the economy adding jobs whereas forecasts called for a Job Cut
  • Challenger Job Cut Report
    • In contrast, this showed the worst level of job cuts in 2 years, further adding to the ambiguity about predicting Friday
  • Mortgage Applications
    • Came in at a 6 year low
    • This report is usually not a big mover of markets, but relevant to the industry nonetheless
  • on Manufacturing Numbers
    • This was slightly higher than expected, but not so much higher that it caused a worsening of rates
  • Oil Inventories
    • comes later in the day and may bolster stocks if there is a surplus

On Tap For The Rest Of The Week:


THURSDAY

    - JOBLESS CLAIMS, which is a weekly report of how many new applicants have come forward for unemployment benefits.  The more jobs lost, the better for mortgage rates.

FRIDAY

    - EMPLOYMENT SITUATION.  This is a hugely important monthly report that tracks "non-farm" payrolls which is the most closely watched indicator of the labor market.  The lower the number, the better for rates.

 Conclusion

Even though locking is the safe bet this morning in the face of stronger than expected economic data, the fact that rates have not worsened more is a reassuring aspect of the mortgage market.  As long as the jobs report on Friday is at or worse than expectations, floating should prove to be a safe bet.  However, this is a big variable.  Again, if you can lock quickly, you are currently safe to float until further notice, but reassess where you stand near the end of the day and if rates look desirable, locking takes the risk out of Friday's numbers