Mortgage Rates Second Week – October 2019:
Does anyone remember October 2018?
Bond yields were moving and so were mortgage rates. Concerns over a growing economy and increasing inflation pushed the 10y yield above 3.00% and 30 year fixed mortgage rates moved above 5.00% for a short period of time. A lot has changed since then as the economy was not as strong as people thought and inflation seemed to reverse course and stabilize as we moved in November and December. As a result mortgage rates dropped significantly despite the Fed raising in December 2018.
As we move into mid-October mortgage rates remain stable and well below the levels seen a year ago. Homeowners and homebuyers should not hesitate to lock in terms to take advantage of current market conditions.
Mortgage Rates - Conforming Loans
Mortgage Rates - FHA Loans
Mortgage Rates - Jumbo Loans
Mortgage Backed Securities & Treasury Snapshot:
October 07, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 101.91, and the FNMA 3.5 coupon started the day at 102.72. The 10y Treasury yield started the day at the 1.52% level.
Post open the market sold off pushing the 10y yield to nearly 1.55%.
October 08, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 101.91, and the FNMA 3.5 coupon started the day at 102.80. The 10y Treasury yield started the day at the 1.52% level.
October 09, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 101.81, and the FNMA 3.5 coupon started the day at 102.69. The 10y Treasury yield started the day at the 1.56% level.
October 10, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 101.72, and the FNMA 3.5 coupon started the day at 102.63. The 10y Treasury yield started the day at the 1.58% level.
October 11, 2019:
Mortgage Backed Security FNMA 3.0 started the day at 101.22, and the FNMA 3.5 coupon started the day at 102.38. 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. 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.
On Monday we Employment Trends for September and Consumer Credit for August. On Tuesday we have the Core Producer Prices for September. On Wednesday we have the weekly Mortgage Market Index report, Wholesale Inventories and Wholesale Sales reports. On Thursday we have the Core CPI, the weekly Jobless Claims report and an important 30y Auction.
To finish off the week we have Import Prices, Export Prices, 1y Inflation and 5y Inflation Outlook along with Consumer Sentiment.
The most important report this week is the Core CPI report which measures the level of inflation. Low inflation is good for bonds/mortgage rates and high inflation is bad for bonds/mortgage rates. The previous report came in at 2.4% and market expectations are for a report showing a 2.4% increase (year/year).
What do we need to see to have a positive impact on mortgage rates?
If the report shows a sub 2.3% increase we may see the market react in a positive way however if it comes in at 2.3% or 2.4% it’s unlikely the market will react in a significant way unless there is additional events that happen. I do think there is risk for mortgage rates if we see a 2.5% or higher since bonds have rallied significantly in the last week.
Core Producer Prices:
Last months reading came in at 2.3% and that what the market was expecting heading into this months reading. The reading came in at a 2.0% increase and the month/month came in at a negative -0.3% (last months reading was a positive 0.2%)
This report is a positive for mortgage rates however it’s not as important as Thursday’s Core CPI report.
Mortgage Market Index:
The Mortgage Market Index came in at 574.5 after last weeks reading of 553.8. The Refinance component came in at 2418.1 after last weeks 2202.6 reading.
The Purchase component came in at 252.2 after last weeks reading of 263.8 and the average 30y fixed rate (according to the report) is 3.90% (after last weeks reading of 3.99%).
Wholesale Inventories and Sales:
The market is expecting Wholesale Inventories to come in at 0.4% (last month it was 0.4%) and Wholesale Sales expectations are for a 0.2% increase after last months reading of 0.3%. The report is released at 10am (EST).
The FOMC Minutes will be released today (2:00pm EST). If there is any significant market reaction I’ll update the post.
This is one of the most important economic reports for bond markets and mortgage rates. Expectations were for a reading of 2.4% and that is what the report delivered. Last month the report showed a 2.4% increase as well. The month/month report showed a 0.0% increase after last months 0.2% increase.
Import and Export Prices:
Expectations were for a 0.0% increase in Import Prices and the report showed a 0.2% increase. As for Export Prices; the market anticipated a 0.0% report however it showed a decline of -0.2%.
1y and 5y Inflation Expectations:
The 1y Inflation report came in at 2.5% (last month it was 2.8%) and the 5y Inflation report came in at 2.2% (last month it was 2.4%).
Understanding PMI, MI and LPMI:
If you have less than 20% equity in your property or your purchasing a property with less than 20% down you either have a second mortgage, PMI or MI.
- Second mortgage: A second mortgage can either be a fixed rate mortgage or an adjustable rate mortgage (typically referred to as a Home Equity Line of Credit – HELOC). It’s called a “Second” mortgage because on title it’s in second position behind your first mortgage.
- PMI: Private Mortgage Insurance is when a homebuyer or homeowner has less than 20% down (or 20% equity) and an outside insurance company issues an insurance policy to help cover the risk of default. PMI is associated with non-government loans (Conventional only).
- MI: Mortgage Insurance is the same thing as PMI however it’s not issued by a company and it’s only for government loans (FHA).
- LPMI: Is Lender Paid Mortgage Insurance. This is when the lender takes on the payment of the PMI and in turn they increase your mortgage interest rate to help cover the cost.
PMI and MI are the two most popular options when someone has less than a 20% downpayment or less than 20% equity in their home.
Important Facts To Remember:
- PMI is not tied to a bond market and is not an interest rate. It’s an insurance policy and it’s based on risks associated with the loan and market place performance of similar type of loans (over time).
- Credit score, Debt-To-Income ratio, Loan-To-Value, Location, Number of borrowers all play a role in determining the level of PMI coverage.
- MI is standard and everyone who obtains a FHA pays the same level of MI.
- You can get rid of PMI without having to sell the home or refinance the loan.
- Generally speaking; you cannot get rid of MI or LPMI unless you refinance or sell the home.
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