Guest Post – Tradition Mortgage’s Weekly Update October 26, 2015
Foreign Central Bank Actions Lift Stocks, Rates Stay Flat
Last week European Central Bank (ECB) President Mario Draghi suggested that the ECB may expand its bond purchase program at its next meeting in December. While this is intended to stimulate the economy which could lead to higher inflation, the primary impact on bonds is from increased demand. The purchase of European bonds makes other global bonds, including U.S. mortgage-backed securities (MBS), relatively more attractive, increasing their demand as well. Since mortgage rates are set based on MBS prices, rates improved after the news.
The added stimulus in China to boost economic growth announced on Friday did not involve any bond purchases. As a result, the main effect for mortgage rates was to raise expectations for future inflation, which was negative. The ECB and China actions roughly offset each other in regards to impacting mortgage rates, which were flat on the week.
The housing numbers are rock solid again. September existing home sales increased 5% from August, near the best levels in eight years, and they were 9% higher than a year ago. Total inventory of existing homes available for sale fell to a 4.8-month supply, and it was 3% lower than a year ago. The median existing-home price was 6% higher than a year ago. September single-family housing starts have held steady over the last three months near the best levels of the year. They were 12% higher than this time last year.
Week Ahead: The Fed Statement will be released on Wednesday. Investors do not expect a change in policy at this meeting, and they will be looking for guidance about the timing for the first rate hike. Beyond the Fed meeting, New Home Sales will be released on Monday. Durable Orders, an important indicator of economic activity, will come out on Tuesday. The first reading for third quarter GDP, the broadest measure of economic growth, will be released on Thursday, along with Pending Home Sales. Core PCE inflation will come out on Friday.
Today’s rate snapshot: 30-day lock rates as of 10/12/2015 10:53 AM:
30-year Fixed (conforming): 3.75% (3.875%APR*) same as last week
15-year fixed (conforming): 3.00% (3.125% APR*) same as last week
7-year ARM (conforming) 3.25% (3.375% APR*) same as last week
30-year Fixed (jumbo) 3.75% (3.875% APR**) same as last week
*Based on 70% LTV, primary residence, rate and term refinance and purchase, 175k minimum loan size, 30-day lock. Rates subject to change at any time based on bond market pricing fluctuations. **Minimum loan size for a jumbo loan is $418,000. This information is intended for professional reference only, and not intended for consumer use. Additional qualifications and disclosures apply.
Have a great week!
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Tradition Mortgage LLC
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4350 Baker Rd Suite 190 / Minnetonka, MN 55343 / www.TraditionWest.com