Rate Lock Advisory

Monday, October 3rd

Monday’s bond market has opened sharply higher following news that there will be changes to the UK’s fiscal plan, which had caused the dramatic bond volatility last week. Stocks are rallying with the Dow up 528 points and the Nasdaq up 131 points. The bond market is currently up 48/32 (3.63%), but heavy selling late Friday is going to limit this morning’s improvement in rates to approximately .250 - .375 of a discount point compared to the day’s early pricing. Many lenders revised rates higher before closing Friday. If you saw an intraday increase, you should see a larger improvement this morning.

48/32

Bonds

30 yr - 3.63%

528

Dow

29,254

131

NASDAQ

10,787

Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock

High

Positive

ISM Index (Institute for Supply Management)

This week’s calendar began late this morning with the release of the Institute for Supply Management’s (ISM) manufacturing index for September. They announced a reading of 50.9 that fell short of forecasts and a decline from August’s 52.8. The lower reading means fewer surveyed manufacturing executives felt business improved than did the previous month. Since that is a sign of a slowing manufacturing sector, we can label the report good news for bonds and mortgage rates.

High

Positive

Geopolitical/Financial Issues

News from the UK that they will be making revisions to the previously announced plan to cut taxes and sell a large amount of bonds to offset the lost tax income has fueled a rally in the global bond markets. The rebound there has carried into our morning session, leading to strong gains long before this morning’s economic data was posted. This is an issue that will be watched closely, but appears to have eased investor fears, at least temporarily.

Medium

Unknown

None

The remainder of the week brings us three more monthly economic reports, including the extremely influential Employment report. There are also a high number of Fed member speaking engagements spread throughout the week that traders will be listening to.

Medium

Unknown

Factory Orders

August's Factory Orders data will be released at 10:00 AM ET tomorrow. It is similar to last week's Durable Goods Orders release except this version includes orders for both durable and non-durable goods. Forecasts are calling for a 0.3% increase in new orders. A decline would be good news for the bond market and mortgage rates while a larger rise would be bad news. Since a good portion of the data was already released last week, it is unlikely that this release will have a noticeable impact on mortgage pricing.

High

Unknown

None

Overall, Friday is the most important day of the week due to the importance of the Employment report. Thursday is best candidate for calmest day, even though we still should see some movement in pricing that day too. We can expect to see a fair amount of movement in rates this week, so it would be prudent to keep an eye on the markets if still floating an interest rate and closing in the near future.

Float / Lock Recommendation

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

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