Rate Lock Advisory

Wednesday, January 27th

As expected, this week’s FOMC meeting has adjourned with no change to key short-term interest rates. In fact, there is little new to take away from the post-meeting statement and press conference with Fed Chairman Powell. Most notable is acknowledgement that the economic recovery slowed since December’s meeting, but that also did not come as a surprise.



30 yr - 1.02%







Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock



Federal Open Market Committee (FOMC) Statement

With little in terms of new or fresh information from the Fed, we have seen little reaction in the bond market. Stocks have extended earlier losses though, pushing the Dow lower by 636 points and the Nasdaq down 410 points. The bond market is currently up 3/32 (1.02%), which should keep mortgage rates at this morning’s levels.



Treasury Auctions (5,7,10,20,30 year)

Yesterday’s 5-year Treasury Note auction did not draw a strong demand. The benchmarks used to gauge investor interest in the securities showed a below average demand. Fortunately, the results did not derail the afternoon rally in bonds that led to some lenders making an intraday improvement to rates. We have the 7-year Note auction to deal with tomorrow, but day one of this two-day auction cycle usually has the larger impact on rates. Results of tomorrow’s sale will be posted at 1:00 PM ET, meaning it will be an afternoon event to watch.



Durable Goods Orders

December’s Durable Goods Orders report was released at 8:30 AM ET this morning, revealing a 0.2% rise in new orders for big-ticket products such as airplanes, appliances and electronics. This was weaker than the 0.9% increase that was expected, but the size of the variance isn’t as important in this report as it is in others. That is because this data is known to be quite volatile from month to month, meaning large swings are common. Still, we can consider the data slightly favorable for mortgage rates as it indicates weaker than forecasted manufacturing activity.



Weekly Unemployment Claims (every Thursday)

Tomorrow morning brings us a few reports to we will be watching. In addition to weekly unemployment figures that are expected to show 875,000 new claims for benefits were filed last week, we will also get the highly important initial 4th Quarter GDP reading and two less important monthly reports. The afternoon brings us the 7-year Treasury Note auction also.



Gross Domestic Product (GDP)

The big news of the day will be the initial quarterly Gross Domestic Product (GDP) reading at 8:30 AM ET. This data is so important because it is considered to be the best measurement of economic activity. The GDP itself is the total sum of all goods and services produced in the United States. Its results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. This initial reading will be followed by two revisions, each released approximately one month apart. Last quarter's first reading, which usually carries the most significance, is expected to show the economy grew at an annual rate of 4.2%. A noticeably weaker reading would be great news for the bond market, questioning the strength of the economic recovery. That may fuel stock selling and a rally in bonds that should push mortgage rates lower. However, a larger than expected increase, indicating the economy was stronger than thought, will probably fuel bond selling and lead to higher mortgage rates.



Leading Economic Indicators (LEI) from the Conference Board

The two monthly reports of the of the day will come at 10:00 AM ET tomorrow, starting with December's Leading Economic Indicators (LEI). The Conference Board, who is a New York-based business research group, compiles the data and releases this report. It attempts to predict economic activity over the next several months, but since it is posted by a non-governmental agency, it is not considered to be of high importance to the financial and mortgage markets. Thursday's release is expected to reveal a 0.3% rise, meaning the indicators are predicting modest growth in economic activity over the next several months. As long as we don't see a noticeable increase, I don't think this data will have much of an influence on mortgage pricing.



New Home Sales

December's New Home Sales report will be the other. This is the least important report of the week and is the sister release to last week's Existing Home Sales data. It also measures housing sector strength and mortgage credit demand, but usually does not have a significant impact on bond trading or mortgage rates unless it comes out with a significant surprise because it covers such a small part of all home sales. Thursday's report is expected to show an increase in sales of newly constructed homes, hinting at strength in the new home portion of the housing sector. The smaller the number of sales, the better the news it is for bonds and mortgage rates.

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... Float 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.