WeeklyBasis 11/20/2010: Give Thanks Rates Haven’t Risen More
Rates rose .375% the week of November 8 and held this same level to end last week. As noted in the last WeeklyBasis, this means a borrower pays about $109 more per month on a $500,000 loan.
Rates have risen because mortgage bond markets were expecting the Fed to say on November 3 that they’d buy more mortgage bonds. But the Fed committed only to buying Treasuries, and mortgage bonds sold off as a result. When mortgage bond prices drop in a selloff, rates rise. Below is a preview of the short but incredibly volatile Thanksgiving rate week: the upward rate trend is likely to continue.
Tuesday’s three key reports and rate impacts:
(1) Second of three GDP readings for 3Q2010. The first reading showed the economy grew at 2% in 3Q vs. 1.7% from 2Q. If GDP goes up or even if the contribution of consumer expenditures goes up, rates will rise.
(2) October Existing Home Sales from the National Association of Realtors. The September report showed a 10% increase. This may be net neutral for rates because investors will hold out for November 30 Case Shiller home price report.
(3) Minutes from the 11/3 Fed meeting are released where markets will see if there was any extra debate about mortgage rate support—if not, rates will rise.
Wednesday’s three key reports and rate impacts:
(1) The Fed’s favorite measure of inflation, Personal Consumption Expenditures Index, will give markets another October inflation reading. This follows last week’s readings where consumer (CPI) inflation was neutral and business (PPI) inflation was up. Rates will rise if PCE Index is higher.
(2) Personal Income & Spending: Another measure of wage inflation and consumer strength. Most likely net neutral for rates because wages probably won’t move notably.
(3) October New Home Sales: As with Existing Sales, this number was up a lot, 6.6%, in September. This is probably net neutral for rates as this number eases off for October.
CONFORMING RATES ($200,000 to $417,000) 0 POINT
30 Year: 4.375% (4.49% APR)
FHA 30 Year: 4.25% (4.37% APR)
5/1 ARM: 3.25% (3.37% APR)
SUPER-CONFORMING RATES ($417,001 to $729,750 cap by county) 0 POINT
30 Year: 4.75% (4.87% APR)
FHA 30 Year: 4.5% (4.62% APR)
5/1 ARM: 3.875% (3.98% APR)
JUMBO RATES ($729,751 to $2,00,000) 1 POINT
30 Year: 5.25% (5.37% APR)
5/1 ARM: 3.875% (3.98% APR)