There was little change for Mortgage Rates this week as Mortgage Bonds recovered a bit of the losses from the prior week. The stock market surged on news of strong earnings reports and while this typically is not good for Bonds and Mortgage Rates, they held up relatively well.
The 3.50% Bond coupon was down 3 basis points at 100.94, up 28 basis points for the week. While there is a strong level of support for Bonds, the technicals will have to take a back seat to the Euro news coming out over the weekend. The average 30 Year Fixed Rate finished the week at 4.125%. Mortgage Bonds and Treasuries moved in opposite directions, proving once again that Mortgage Rates are not tied to the 10 year Bond as many inexperienced Mortgage Brokers and Bankers would lead you to believe.
The recommendation is to float Mortgage Rates, but be prepared to lock in at a moments notice.
Beware of Bank’s Fees
Be careful when shopping for a Mortgage. Many of the big banks are charging excessive up front fees to Mortgage Applicants. Unlike professional Mortgage Brokers, banks are charging Application, Processing, Lock in, and commitment fees. Some banks are also charging a non refundable .50% up front fee. The reason is simple and you know the answer if you’re keeping up with the financial news. Banks are still hurting.
Don’t believe for a minute that you will get better terms from the bank you have your checking and savings account with, that’s a myth. The fact is the banks are brokering their loans to the government agencies Fannie Mae and Freddie Mac. So they are beholding to the same rates and fees Fannie and Freddie set. And, unlike professional brokers, banks are not required to be transparent with all their costs and revenues. Additionally, banks mortgage employees are not required to be educated, tested or licensed as professional brokers. So you might as well ask the counter person at McDonalds to help you with your application for a mortgage. Surprising? You bet. Big banks lobbyists made sure that the banks were exempt from many of the consumer protection regulations. So choose wisely when searching for one of your biggest financial decisions.
Economic News
Fed Governor Daniel Tarullo made headlines when he called for more Mortgage Bond purchases, more Quantitative Easing (QE3).
Housing starts rose to a seasonally adjusted rate of 658,000 units, nearly 11% higher than September of 2010. However, the surge was led by multi-dwelling units as rental demand soars. Building Permits, a sign of future construction, fell 5% to 594,000.
Consumer Price Index (CPI) for September rose by 0.3%, inline with estimates on higher gasoline and food prices, making the year-over-year number to 3.9%, up slightly from last month’s reading of 3.8%. Longer term inflation is on the rise, the year-over-year figure was just 1.6% in January.
The Producer Price Index rose by a staggering 0.8% in the month of September, increasing year over year wholesale prices by steaming 6.9%.
Existing Home Sales Fall 3.0% in September
Jobless Claims Fall More than Expected, Down 6,000 to 403,000; Estimates Called for Drop of 4,000