Mortgage Rates to Hold Levels, June 25, 2010

By:: David Coster - MortgageLoan.com

Mortgage Rate Trend Direction Neutral

Economic Reports/Rate Impact Final GDP 8:30 AM ET, Moderate Rate Impact

Consumer Sentiment, 10:30 AM ET, Moderate Rate Impact

Key News US Financial Reform, G20 Meeting

Summary

In unusual market activity yesterday, mortgage pricing worsened despite big losses in the stock markets. Bond investments and mortgage-backed securities (MBS) typically perform well (good for mortgage rates) when the stock market declines. Analysts suggest that many MBS investors were selling to raise capital ahead of this weekends G20 meeting in Toronto. MBS investors were able to lock in some profits while ensuring that they would be able to remain flexible going forward to place their funds where they can get the best returns. Economic reports released today are not expected to provide direction for mortgage rates today. Mortgage rates will likely be close to yesterday’s close at initial pricing this morning.

Impact of economic data released today

Final GDP numbers for the 1^st Quarter were released at 8:30 AM ET, and demonstrated continued growth in the US economy, but at a slower rate than previously anticipated. The Consumer Sentiment report will be released at 10:30 AM ET and is expected to show that consumers are still relatively confident about their economic prospects going forward. The GDP report did cause stocks to head lower and bonds (including MBS) to head higher in early trading which is positive for initial mortgage pricing today.

Impact of international or political events

US House and Senate negotiators announced this morning that they had reached a compromise agreement on financial reform legislation. Early reviews of the bill suggest that restrictions on banks are likely to make it more difficult for them to earn money and could lead to less available credit and higher fees for consumers. However, the very presence of a final bill, reduces uncertainty and could help stocks today. Continuing analysis of this bill throughout today and in the days ahead could lead to further mortgage rate movement.

The G20 meeting in Toronto over the weekend is not likely to provide direction to mortgage rates today, but will provide a great deal of influence for the start of next week.

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