Brexit will be front and center for bond markets and consumer mortgage rates this week. Most observes believe the UK will reach a Brexit deal and it will most likely happen this week. The good news for homeowners and homebuyers is that mortgage rates remain near their 2019 lows and well below the levels seen in October 2018. However that might not last.
A quick note to those that are waiting to lock in a mortgage rate at current levels:
If you are looking to obtain a mortgage for the purchase a home or if you’re looking to refinance a current mortgage; it’s important to evaluate the current market for mortgage rates and understand the risks associated with waiting to lock in at current levels. The risks for mortgage rates moving higher currently exceeds the potential mortgage rates might move slightly lower. The prudent choice to is be safe in risky environments and lock in your mortgage rates sooner rather than later.
California Mortgage Rates (Conventional)
California FHA Mortgage Rates
California Jumbo Mortgage Rates
Mortgage Backed Securities & Treasury Snapshot:
October 21, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 100.94, and the FNMA 3.5 coupon started the day at 102.31. The 10y Treasury yield started the day at the 1.77% level.
Overall the bond market is leaning more towards a “sellers” market then a “buyers” market due to the potential Brexit deal that may happen this week. Because of this mortgage lenders will most likely be cautious with mortgage rates. Later in the week several important economic reports could have a significant impact on bond markets and mortgage rates in California and across the country.
October 22, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 100.95, and the FNMA 3.5 coupon started the day at 102.30. The 10y Treasury yield started the day at the 1.77% level.
With no major economic news today, Brexit will be front and center for most bond traders as the market awaits a vote later today. Yesterday the 10y yield pushed as high as 1.80% so it’s a positive to see the 10y yield open below that level.
Some people have asked why the market views a resolution to Brexit as a positive when it will have no immediate impact on the UK, EU and more importantly the US? Excellent question! The simple answer is that the market views Brexit as an orderly or disorderly event. An orderly event is a negative for bonds in the short term but soon after it would not be surprising to see that sentiment change as investors focus on what happens next.
October 23, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 101.05, and the FNMA 3.5 coupon started the day at 102.34. The 10y Treasury yield started the day at the 1.73% level.
Shortly after the open bonds sold off and the 10y yield moved above 1.74%. Mortgage rates will start the day at similar levels as the market looks to tomorrow’s economic data; mainly the Durable Goods report and the Markit Manufacturing PMI. For those that are looking for lower mortgage rates you’ll want to keep an eye on the 1.70% – 1.72% level (10y). A significant break below that might encourage a meaningful rally in the Mortgage Backed Securities market. However be realistic with your expectations; mortgage rates will probably not improve that much.
October 24, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 101.13, and the FNMA 3.5 coupon started the day at 102.45. The 10y Treasury yield started the day at the 1.75% level.
October 25, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 101.05, and the FNMA 3.5 coupon started the day at 102.38. The 10y Treasury yield started the day at the 1.76% level.
October 28, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 100.89, and the FNMA 3.5 coupon started the day at 102.31. The 10y Treasury yield started the day at the 1.84% level.
News that Trump might sign the Phase One of a trade deal with China is helping push yields higher however there are still no details as to what exactly will be in the trade deal.
October 29, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 100.95, and the FNMA 3.5 coupon started the day at 102.31. The 10y Treasury yield started the day at the 1.83% level.
October 30, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 101.00, and the FNMA 3.5 coupon started the day at 102.36. The 10y Treasury yield started the day at the 1.82% level.
October 31, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 101.41, and the FNMA 3.5 coupon started the day at 102.55. The 10y Treasury yield started the day at the 1.73% level.
What a difference a day makes. Just prior to the Fed decision yesterday the 10y yield was risking a move above 1.90% and today it’s below 1.75%. Mortgage Backed Securities are joining in the rally however mortgage lenders will be hesitant to pass along the gains until early next week. The reason is that lenders like to see a rally hold (or continue) before they commit to offering lowering rates.
I hope everyone has a safe and happy Halloween!
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Important Economic Data This Week:
Here we cover the daily economic events that might impact mortgage rates. After the report comes out we’ll update the post with that information and comment on if there is a potential impact on on the Mortgage Backed Securities market and consumer mortgage rates.
There are no major economic reports on Monday. On Tuesday we have Existing Home Sales. On Wednesday we have the weekly Mortgage Market Index, Monthly Home Prices and a 5y Auction. On Thursday it’s the weekly Unemployment Claims, New Home Sales, Durable Goods and Markit PMI for October (this report has been a market mover a few times in 2019). On Friday we have Consumer Inflation Expectations, and Consumer Sentiment.
Between October 28th – October 31st we’ll have the Case Schiller report, Consumer Confidence , weekly Mortgage Market Index, Advance Q3 GDP, ADP Employment report, Fed Meeting, Core PCE and Chicago PMI.
Existing Home Sales:
Last month’s reading came in at a 5,490,000 (annual rate) and the market is expecting a reading of 5,450,000 reading this month. This report typically has no impact on mortgage rates.
Mortgage Market Index:
There was a significant decline in mortgage applications in the most recent survey. The Mortgage Market Index fell from 585.5 to 515.9. The Purchase component declines from 2506 to 241.7 and the Refinance component declined from 2505.8 to 2076.9. The national average 30 year fixed rate increased from 3.92% to 4.02% (at JBMC, Inc. we are offering mortgage rates below the national average).
Monthly Home Prices:
Year over year monthly home prices increased at an annual rate of 4.60%; down from last months report of an annual increase rate of 5.00%. The month over month increase was 0.2%; down from last months increase of 0.4%.
Market expectations were for a reading of -0.8% after last months 0.2% reading. The report showed a decline of -1.1%.
Last weeks reading came in at 214,000 claims filed and this week the reading came in at 212,00 claims filed.
Markit Manufacturing PMI:
Current market expectations are for a reading of 50.7 after last months reading of 51.1. The reading came in a bit stronger than expected (51.5).
New Home Sales:
The market is anticipating the report to show 701,000 units (annual rate) after last months reading of 713,000.
Consumer Inflation Expectations:
Last months reading was 2.5% for the 1y and 2.25% for the 5y. The 1y reading for October came in at 2.5% and the 5y reading for October came in at 2.3%.
Market expectations were for a reading of 96.0 and the reading was 95.5.
Last months report showed a 2.0% increase and market expectations are for a 2.1% increase.
The market is expecting the reading to come in at 128.0 after last months reading of 125.1. The actual reading came in at 125.9.
Mortgage Market Index:
The report came in at 519.2 after the 515.9 reading last week. The refinance component came in at 2066.0 after last week’s reading of 2076.9. The Purchase component came in at 247.2 after last week’s reading of 241.7.
ADP Employment Report:
The reading came in at 125,000 jobs created after last months reading of 135,000 jobs created. Analyst and investors were expecting the report to show 120,000 jobs created.
Advanced Q3 GDP:
Estimates are for a reading of 1.6% after the 2.00% that was reported for Q2. The reading came in at 1.90% and post report the bond market.
The reading came in at 1.7% after last months reading of 1.85.
The market is expecting a reading of 48.0 after last months reading of 47.1. A reading below 50 shows contraction. The reading came in at 43.2; a huge disappointment for the economy and post report the 10y yield moved to 1.70%
Mortgage Rates and the Fed Decision:
Everyone is expecting the Fed to lower by a .25% however that does not mean mortgage rates will move lower by a .25%. For all the latest news be sure to read how mortgage rates are impacted by the Fed decision.
Mortgage Rates and Brexit:
Are you trying to obtain a better understanding of the possible impact Brexit may have on mortgage rates? Last week’s post covers the possible impact Brexit will have on mortgage rates.
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.