Today’s Mortgage Rates:
Mortgage rates are starting to improve as we move into August. Conforming, FHA and Jumbo fixed rate mortgages are near multi-year lows for both purchase and refinance transactions. Anyone who has purchase a home in the last two years might want to consider reviewing their refinance options; especially those with a 30 year fixed rate above 4.00% and a 15 year fixed rate above 3.50%.
Mortgage Rates - Conforming Loans
Mortgage Rates - FHA Loans
Mortgage Rates - Jumbo Loans
Mortgage Backed Securities & Treasury Snapshot:
August 5th, 2019:
Mortgage Backed Security FNMA 3.5 started the day at 102.84 and the FNMA 4.0 coupon started the day at 103.75. The 10y Treasury yield started the day at the 1.77% level.
Why the big drop in the 10y yield?
Sunday night the Chinese government devalued it’s currency in retaliation to Trump’s latest round of tariffs (announced last week). This has caused stock markets to selloff and bond markets have rallied has concerns over an escalation in the trade war with China increase. Moving forward China will play a big part in market movements and any resolution to the most recent tariffs will most likely send bond yields and mortgage rates higher.
Later this week are two notable auctions:
If demand is strong that could push yields lower or at least confirm current levels. However if we see weak demand that could cause a dramatic shift and push yields higher which might cause mortgage rates to move up as well (more on this below).
Mortgage Backed Security FNMA 3.5 started the day at 102.86 and the FNMA 4.0 coupon started the day at 103.86. The 10y Treasury yield started the day at the 1.76% level.
Yesterday the 10y yield went as low as 1.68%. China announced a stronger stance on it’s currency causing the market to sell off (stocks rallied) which is pushing yields higher. During periods of sharp volatility mortgage lenders are reluctant to make big moves with mortgage rates due to the likelihood that the market may snap back.
The best thing for bond markets and mortgage rates moving forward is stability which will help keep mortgage rates low as we move further into August.
Mortgage Backed Security FNMA 3.5 started the day at 102.78 and the FNMA 4.0 coupon started the day at 103.63. The 10y Treasury yield started the day at the 1.64% level. Due to the current environment I’m going to add FNMA 3.0 to this and today it opened at 101.80.
Notice the difference with the 10y move down and in yield and Mortgage Backed Securities?
Treasuries are resuming their rally to lower yields while Mortgage Backed Securities remain stuck at higher levels. This is a great example of why the 10y yield is not always a good indicator for the direction of mortgage rates. Most of the time it is; sometimes it’s not.
Clearly investors are scrambling to buy US Government bonds and if these current levels hold Mortgage Backed Securities might eventually follow. It could take months for that to happen or it may never happen.
With 30 year fixed mortgage rates at current levels there is little incentive for mortgage lenders to move much lower due to the significant demand that exists for a mid 3% 30 year fixed mortgage rate.
Mortgage Backed Security FNMA 3.0 started the day at 101.50, FNMA 3.5 started the day at 102.67 and the FNMA 4.0 coupon started the day at 103.59. The 10y Treasury yield started the day at the 1.72% level.
Yesterday was the second day the 10y yield moved below 1.70% and then reversed course and moved higher. It’s still early in the process but it appears the 10y yield is leveling off above the 1.70% level. If we can see some stability the rest of the week, in which the 10y yield is in and around the 1.70% – 1.78% level, this will be good news for the market and potentially mortgage rates. Less volatility is better for mortgage rates.
Mortgage Backed Security FNMA 3.0 started the day at 101.58, FNMA 3.5 started the day at 102.69 and the FNMA 4.0 coupon started the day at 103.58. The 10y Treasury yield started the day at the 1.71% level.
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Important Economic Data This Week:
Here we cover the daily economic events that might impact mortgage rates:
On Monday we have the ISM Non-Manufacturing PMI. There are no major economic reports on Tuesday.
On Wednesday we have the weekly Mortgage Market Index, Consumer Credit report and a 10y Auction. On Thursday we have the weekly Jobless Claims number, Wholesale Sales and Wholesale Inventories. There is also a 30y Bond Auction. On Friday with have the Core Producer Prices report.
Monday August 5th:
ISM Non-Manufacturing PMI:
Expectations are for a 55.5 reading; last months reading was 55.1. The reading came in at 53.7 and post report the 10y yield moved below 1.76%. As you can see the report was much weaker than expected and well below last months reading.
Wednesday August 7th:
Mortgage Market Index:
Last week the index came in at 484.00 with the Refinance component coming in at 1791.2 and the Purchase component coming in at 253.0.
The Mortgage Market Index reading came in at 509.8 due to a significant increase in refinance applications. The Refinance component came in at 2003.10 and the Purchase component came in at 247.9 (a decline from last week).
Seeing Purchase applications decline is surprising considering the current level of mortgage rates; sellers and home builders are hoping this trend reverses course.
According the Mortgage Banker Association the average 30 year fixed rate is 4.01% with nearly a .50 point in cost (plus fees). Good news is we’re significantly below that!
Expectations are for a reading of 16.00 and last months reading came in at 17.09. The reading came in at 14.60 and it was the lowest reading in last six months.
Thursday August 8th:
Last weeks reading came in at 215,000 and that is the expectations for this week heading into the Thursday report. The big question over the next few weeks is will we start to see jobless claims increase due to the recent escalation of the trade war with China? Since the trade war started with China employment has been one of the few bright spots for the economy.
Today’s report came in at 209,00 claims, and continued claims were 1,684,000 (both lower than last week).
Wholesale Sales and Inventories:
Expectations for Wholesale Inventories is a 0.2% growth and Wholesale Sales a 0.2% growth. The Wholesale Inventories report came in at 0.0% and the Wholesale Sales report came in at -0.3%.
Friday August 9th:
Core Producer Prices:
Expectations are for a 2.4% increase (y/y) and the 0.2% (m/m). Last months reading came in at 2.3% and 0.3%. The annual reading came in at 2.1% and the monthly reading came in at -0.1%.
Not a good report for the economy however for bonds and mortgage rates it’s a positive as it shows muted inflation continues on an annual basis and a slight decline on a month over month basis.
Reason’s To Refinance Your Current Mortgage:
With mortgage rates in California near multi-year lows many homeowners through out the state of California are looking to refinance their current mortgage. Each homeowner has their own reason and most of them include at least one of the following:
- A lower mortgage rate
- Decrease the length of the term from a 30 year to a 15 year fixed
- Cash out to improve the home or payoff debt
- To get rid of PMI or MI
- A homeowner may want to combine a 1st and 2nd mortgage
Whatever the reason is now is one of the best times in years to refinance your current mortgage.
FHA Mortgage Update:
Starting September 1st, 2019 the maximum Loan-T0-Value (LTV) ratio on a cash out FHA mortgage loan will be 80%. Currently the maximum LTV is 85%.
Anyone who is considering a cash out loan under the FHA loan program should make sure they move forward before this deadline. Under the cash out FHA program you can use the funds to payoff debt, improve the home, or pay bills such as medical or educational.
Next Weeks Economic Calendar:
There are no important economic reports scheduled for Monday. On Tuesday we have the Core CPI and on Wednesday we have the Import and Export Price reports. On Thursday we have the Retail Sales report along with the Philly Fed Business Index report. To finish off the week we have Housing Starts, Building Permits, and the 5yr and 1yr Inflation Outlook.
JB Mortgage Capital, Inc.:
We offer industry low mortgage rates for both refinance and purchase transactions, personal one-on-one service and we have an A+ rating with the Better Business Bureau (BBB). We also have a top rating with the Business Consumers Alliance (AAA).
We utilize the latest technology to ensure a fast closing and Loan Officer Kevin O’Connor has over 14 years of experience as a mortgage professional.
When it comes to mortgage rates please keep in mind that mortgage rates adjust daily; sometimes they adjust multiple times in a day when the bond market is volatile.
Also things like obtaining cash out, lower credit scores, higher Loan-To-Value ratios, rental properties and the subordination of a second mortgage will cause in an increase in your mortgage rate.
To obtain the most up-to-date quote, specific to your loan scenario be sure to contact Loan Officer Kevin O’Connor at 1-800-550-5538 or you can submit a “Contact Us” request on the our website.
Loan Officer Kevin O’Connor:
Kevin grew up in California and works with clients throughout the state. From the initial quote to the application to the final closing; Kevin works directly with each and every homeowner and encourages his clients to ask questions so that they’re better informed. He updates koloans.com on daily basis and you can connect with him on social media: Twitter Rates01