Mortgage Rates See Slight Improvement

Mortgage rates moved a tad lower today, but you may not have really noticed it in the rate but in the fees that are charged for those rates.  Given that rates had spiked last Wednesday and have not moved too much since then, today's improvement was enough to get rates to the best levels seen since last Tuesday. 

April pending home sales blew the doors off the estimates, and March sales were also revised upward.  Existing home sales and new home sales also better than anyone was thinking.

Wells Fargo announced a new low down payment, low credit scores, 3.0% down payments and without the FHA, down payments can come from anywhere, gifts from family members etc. Like the very old days as it seems to be some lifting in the credit world.  Details and specifics include good underwriting but based on trends of the borrowers instead of simply looking at a credit score that can be as low as 620. Hopefully opening the door to more first time home buyers.

Another strong auction this afternoon’s $28B 7yr note.  Foreign investors are buying US debt in kind of a stampede this week. The demand for this week’s 2, 5 and today’s 7yr notes has been surprising, but not shocking. Money flowing into the US dollar even though interest rates here are about to increase. When the Fed finally gets the guts to make the move the dollar will benefit, adding to the demand for dollar dominated investments.

Tomorrow Q1 GDP expected higher than last month’s reading when the advance report last month. The advance GDP report is almost always revised due to inclusion of data t included in the advance data. The final May reading of the U. of Michigan consumer sentiment index. Markets will close early tomorrow; Janet Yellen expected to speak around Noon at Harvard.

Nice to see a move higher in MBS prices and the decline of yield on the 10yr today. The 10yr,  the driver for mortgage prices, are ending at 1.83% where the 20, 40 and 200 day averages reside, all of them at 1.82%. All of the momentum oscillators still slightly bearish as they have been now for seven sessions. Not increasing any bearish momentum but equally not showing increasing strength. The bond market sitting on the edge at these levels. With all global markets open on Monday and our markets closed, unless the Q1 GDP is well off the estimate, I do not expect to see any movement.  Stay lock as there is still no strong argument to float.

In summary, there has been a lot of media coverage pointing to a potential rate hike causing borrowers to panic lock. I have been steering most clients to be patient as rates have been in a narrow confined range and have not taken the initiative to move aggressively in either direction for quite some time. As always, I clearly communicate to understand the goals for the client and I am ready to lock immediately if need be.