Mortgage Rates Hold Lows at Start of 3rd Quarter, July 1, 2010
Get widgets
Print
Facebook
RSS- By:
- David Coster - MortgageLoan.com
Mortgage Rate Trend Direction: Neutral
Economic Reports/Rate Impact: Jobless Claims, 8:30 AM ET, Moderate Rate Impact
Construction Spending, 10:00 AM ET, Moderate Rate Impact
ISM Index, 10:00 AM ET, Moderate Rate Impact
Pending Home Sales Index, 10:00 AM ET, Moderate Rate Impact
Key News: Spanish Debt, Chinese Economy
Summary
The end of the 2nd quarter yesterday brought volatility and movement in mortgage rates but no net change of significance. Today is poised to bring more definitive direction as numerous economic reports are released that will provide a good picture of the strength of the US economy. Additionally, European debt issues remain a major drag on world markets, while new concerns about the strength of China’s economy have emerged. Despite this negative economic news this morning, expectations are for mortgage rates to begin neutral to their closing yesterday.
Impact of economic reports
Weekly Initial Jobless Claims unexpectedly rose in June providing possible evidence that our economy in the US is slowing. A slowing economy is a negative indicator for the direction of stocks and a positive indicator for the direction of bonds and mortgage-backed securities (MBS). When MBS rise in value it enables lenders to lower the interest rates that they charge borrowers on loan products and vice versa. Clearly then, factors outside of the economic news are affecting the direction of MBS.
At 10:00 AM ET, three additional reports will provide direction to the markets for the day. Reports tracking construction spending, manufacturing activity and pending home sales are expected to show additional slowing across the sectors of our economy. This expected result should support lower mortgage rates today.
Impact of international or political events
Credit analysts have downgraded the debt being issued by five regions within Spain and have warned that Spanish government debt is being evaluated for possible downgrade. Overnight, Spain conducted an auction of government debt that was not as successful as previous auctions. The inability of a country to refinance its debt through new auctions could lead to a default, or the failure to repay debts that are outstanding. This could cause a lack of confidence in the debt of other nations and ultimately lead to a major economic impact across the world.
Reports out of China suggest that manufacturing output has slowed. Analysts have suggested that this result is simply a reflection of economic slowing in the rest of the world’s economy. Nevertheless, slower economic activity in the world’s third largest economy is an ominous sign for the world economy.
Why are rates not going down on bad economic news?
As has previously been discussed here, there are factors at work in the MBS markets that defy conventional wisdom. Rates do sometimes change in the opposite of the direction that seems correct to the outside observer. These reasons can include supply constraints for MBS and even alternative investment options. The MBS markets and thus mortgage rates are in uncharted waters at historically low levels. There appears to be a wariness or unwillingness to allow lower levels to be reached. I will explore this subject in greater detail in tomorrow’s weekly rate summary.
Call For Rates
800-419-1494
Speak to a lender now.
We will match calls to our toll free number with our network of lenders.Get Mortgage Rates
National Rates
| Loan Type | Today | +/- |
|---|---|---|
| 30 yr fixed | 3.72 |
|
| 15 yr fixed | 3.03 |
|
| 5/1 ARM | 2.75 |
|
Rates may contain points
Browse Mortgage Rates
Featured Guides
Browse our comprehensive guides to popular topics related to mortgage and personal finance.