On Friday, one of our lenders repriced at 4.875% with 1.25% cost, for a conventional loan. I advised those that were closing to lock-in. I thought Monday morning rate sheets would improve and they did. What was the one thing I said that could pressure June, 2009 mortgage rates to 5.5%?
What could reverse the current recovery and send mortgage rates to 5.5%? Inflation, or the fear of it, is the market enemy number one. If traders think the economic recovery is nigh, we could see rates inch up again. I think that's unlikely; the economic data we receive suggests the opposite. If traders get back on the McClintock-Gross bandwagon and think that the US Government is about to declare bankruptcy, we'll see higher mortgage rates.
Economic figures didn't just look better this morning, they looked better than Wall Street expected:
U.S. Manufacturing Contracts at Slowest Pace in Eight Months in ISM Index Manufacturing in the U.S. shrank less than forecast in May as new orders increased for the first time since the recession began, a sign that companies are growing more confident the slump will end this year.
U.S. Consumer Spending Declines 0.1%; Incomes Unexpectedly Increase 0.5% U.S. consumer spending fell for a second straight month as concern over rising unemployment and record wealth destruction prompted households to boost savings rates to the highest level in 14 years.
Consequently, mortgage bond traders are selling which means higher mortgage rates in the near-term. Wall Street traders believe that no matter how much the Fed intervenes, rates will push higher as a hedge against FUTURE Fed actions. It's kind of like musical chairs and nobody wants to be the last one standing with a bunch of worthless mortgage bonds in his portfolio.
I advised you to lock last Friday if you were closing in the first week of June. Today, I'm locking all loans that are closing in 3 weeks or less.