Mortgage Bonds prices continued their trend higher peaking at 103.875 on Wednesday before pulling back. The 10- Year Note climbed over $105 on Thursday with a yield of 2.926%.
Mortgage rates, while still historically low, have not reacted as favorably as lenders are reluctant to lower rates in relation to the record prices of Mortgage Bonds in order to maintain a higher margin of profitability and garner protection from a potential steep drop in prices.
One thing that could help to move Mortgage rates lower is the possibility that the Fed may once again start buying Mortgage Bonds, and increasing its balance sheet to stimulate the economy.
Their balance sheet is already at a lofty $2T, with a theoretical limit of 5T. This may be good for mortgage rates, but can have negative consequences over the long term.
The House of Representatives passed the Financial Reform Bill Wednesday and it will now go in front of the Senate for a vote after July 4th. The Bill does much to eliminate competition in the mortgage industry by, discriminating against small lenders and mortgage brokers. In the end, if passed, it will further restrict the availability of credit and increase costs for home financing to the consumer.
The extension of the Home Buyer Tax Credit was passed on Wednesday by the Senate. Once signed by the President, it will give homebuyers until September 30th to close on a home that was in contract by April 30th.
June Job losses came in at 125,000, more than expected, as thousands of temporary census jobs ended and private hiring grew less than expected. The unemployment rate fell unexpectedly to 9.5% from 9.7%.
We currently recommend locking into mortgage rates, as Bond prices are in the nose bleed section.
Have a Happy and Safe 4th of July Holiday.
FNMA – 30 Year 4.00% Coupon $101.40 +6 BP