Mortgage Commentary

[Adam in CO]

WEDNESDAY AFTERNOON UPDATE: This week?s Fed meeting has adjourned with no change to key short-term interest rates. This was expected, but we did get good news in the post meeting statement. The statement indicated that core inflation pressures have eased, making a future rake hike less likely. The markets have reacted favorably to the news with the Dow now up 115 points and the Nasdaq up 19 points. The bond market is currently up 12/32, which should lead to improvements in mortgage rates of approximately .25 of a discount point. However, many lenders may opt to wait until after tomorrow?s data is posted before reflecting this afternoon?s gains. Regardless, the news is great for bonds and mortgage rates.

Today?s economic news gave us mixed results. The more important of the two was the GDP reading that showed a 3.5% annual pace of growth. This was stronger than expected, indicating that the economy grew more than forecasted. This is bad news for bonds and mortgage rates, but an important inflation related reading in the data actually came in lower than expected.

The Labor Department gave us the 4th Quarter Employment Cost Index (ECI), which showed an increase of 0.8%. This was lower than the 1.0% that was forecasted, meaning that employer costs for wages and benefits did not rise as much as expected. This is very good news for bonds because wage inflation is a concern in the market.

Tomorrow morning brings us the release of two pieces of relevant data. January?s Personal Income and Outlays is the first, giving us an indication of consumer ability to spend and current spending habits. Current forecasts call for an increase in income of 0.5% while spending is expected to rise 0.7%. Larger increases could hurt bond prices, driving mortgage rates higher early tomorrow. Smaller than expected increases should help push mortgage rates slightly lower, assuming the second report of the day doesn?t give us a negative surprise.

The Institute of Supply Management (ISM) will release their manufacturing index at 10:00 AM ET tomorrow. This index tracks manufacturer sentiment by rating surveyed trade executives? opinions of business conditions. It is often the first economic data released each month and is one of this week?s very important reports. Current forecasts are calling for a reading in the neighborhood of 51.5. The lower the reading, the better the news for the bond market and mortgage rates.

If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float 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.