Rate Lock Advisory

Thursday, April 9th

Thursday’s bond market has opened in positive territory following favorable economic news and a slew of other relevant events this morning. Stocks are reacting favorably to the same things, pushing the Dow up 455 points while the Nasdaq has gained 40 points. The bond market is currently up 6/32 (0.75%), which with strength late yesterday should improve this morning’s mortgage rates by approximately .250 -.375 of a discount point in most scenarios. Some lenders may be showing a smaller or larger improvement, depending on their pipeline situation.



30 yr - 0.75%







Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock



Federal Open Market Committee (FOMC) Minutes

Yesterday afternoon’s release of the minutes from the March 15th FOMC meeting showed no major surprises. They showed that the Fed is greatly concerned about the economic impact from the coronavirus and is planning on keeping key short-term interest rates at their current level for the foreseeable future. They also are prepared to do whatever they can to support the economy and keep the markets liquid. The markets had a minimal reaction the release, but this was not the cause of yesterday’s afternoon move in mortgage bonds.



Weekly Unemployment Claims (every Thursday)

This morning’s weekly unemployment update showed that 6.6 million new claims for unemployment benefits were filed last week, down slightly from the previous week’s revised 6.86 million. This was another big number, indicating severe weakness in the employment sector. However, it doesn’t come as much of a surprise, falling within the upper end of the forecasts range. The bond and mortgage markets are responding favorably to the news.



Producer Price Index (PPI)

Also posted early this morning was March's Producer Price Index (PPI) that revealed a 0.2% decline in the overall reading (mostly due to falling oil/gas prices) and a 0.2% rise in the core data that excludes volatile food and energy costs. Both readings were stronger than expected, meaning inflationary pressures at the producer or manufacturing level of the economy were stronger than thought. That causes us to consider the data unfavorable for mortgage rates. Fortunately, the markets aren’t concerned with inflation at the moment and overlooked this release.



University of Michigan Consumer Sentiment (Prelim)

Today’s third piece of economic data was the University of Michigan's Index of Consumer Sentiment at 10:00 AM ET. They announced a preliminary reading of 71.0 for April that was a large decline from March’s 89.1. A large decline was expected, due to the pandemic. This reading means surveyed consumers were much more concerned about their own financial situation than they were last month, which is understandable considering the unemployment numbers and how the virus has affected daily lives. By theory, this is favorable news for bonds and mortgage rates because weaker confidence usually translates into softer levels of consumer spending that fuels economic growth. In today’s case though, a large decline was expected, minimizing the impact on rates.



Misc Fed

The Fed also contributed to this morning’s news cycle by announcing an additional $2.3 trillion in funding sources for businesses and households along with city and state governments. There were many notes included in the announcement, none of which appear to be directly related to residential mortgage rates. But they do provide much needed liquidity in other markets that were overlooked or underfunded with the previous announcements. That has helped boost both the bond and stock markets this morning.



Fed Talk

Fed Chairman Powell is currently holding his webcast interview that started at 10:00 AM ET. His comments include there is no real limit on the amount of assistance the Fed can provide during this crisis, that inflation is not a priority concern right now, further financial assistance may be needed from Congress and that the Fed is currently watching the mortgage industry as it plays a key role in the economic recovery. So far, he has not said anything that is too concerning for bonds and mortgage rates. The answer regarding keeping any eye on the mortgage industry is good news for mortgage shoppers and rates in the short and mid-term periods. There have been concerns about why rates have not moved lower than they have and what impact missed payments and defaults are having on mortgage servicers. The fact the Fed appears willing and able to further support the industry should ease some fears in the market and help keep rates lower in the immediate future. His interview is still ongoing, so there is still a chance we may see a stronger reaction to something he says.



Holiday Schedule

The bond market will close at 2:00 PM ET today while stocks will be open for a full session. All markets will be closed tomorrow in observance of the Good Friday holiday, reopening Monday morning. Due to the holiday and mortgage-related markets being closed for the day, there will not be an update to this report tomorrow.



Consumer Price Index (CPI)

Despite the holiday, it appears we will still get some economic data early tomorrow morning that is normally relevant to bonds and mortgage rates. This will be March’s Consumer Price Index (CPI) that is the sister release of today’s PPI but measures inflationary pressures at the consumer level of the economy. Weaker than expected readings would be favorable news for the bond market and mortgage rates theoretically. But as with today’s PPI, inflation is not of much concern in the markets at the moment, meaning this release will not likely impact rates.

Float / Lock Recommendation

If I were considering financing/refinancing a home, I would.... Lock 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.

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