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Retail Sales Expected To Rise; Mortgage Rates Should Rise, Too

October 13, 2011 by Jeff Cost

Retail Sales 2008-2011

The American Consumer is alive and well, it seems.

Friday morning, the Census Bureau will release its Retail Sales figures for September. The report is expected to show an increase in gross receipts for the 15th straight month with analysts predicting a 0.6 percent increase from August.

The projected increase represents the largest jump in Retail Sales in six months and would likely lead mortgage rates higher for buyers in Louisville and nationwide.

The connection between Retail Sales and mortgage rates is fairly straight-forward. Retail Sales are the majority component of “consumer spending” and consumer spending represents the majority of the U.S. economy — up to 70 percent, by some estimates.

And, as the economy goes, so go mortgage rates.

10 months ago, mortgage rates shot forward to start the year. This is because expectations were high for a strong economic rebound. Conforming and FHA rates crossed 5 percent at the time and were headed toward six.

By mid-April, though, it was clear that economic data was falling short of predictions. As a result, mortgage rates declined, kicking off the 2011 Refi Boom. Then, by August, on ongoing economic softness, mortgage rates in Ohio fell further, making new all-time lows.

Expectations for a recovery have returned. Rates are now rising.

Last week’s strong jobs report sparked hope for the U.S. economy and investors have been voting with their dollars. Mortgage rates are now up 7 consecutive days and Friday’s Retail Sales report could cement the trend.

If you’re shopping mortgage rates today, there’s risk in “floating”. You may want to lock your rate before Friday’s Retail Sales report drives rates even higher.

The Retail Sales report will be released at 8:30 AM ET.

What’s Ahead For Mortgage Rates This Week : October 11, 2011

October 12, 2011 by Jeff Cost

Unemployment Rate (2008-2011) Mortgage markets worsened last week as safe haven buying eased and demand for mortgage-backed bonds dropped. As in most weeks since March 2011, Greece and U.S. jobs dictated market direction.

Conforming mortgage rates in OH rose last week, lifting rates off their all-time lows and causing consternation among the nation’s would-be buyers and refinancers.

Last week’s action may surprise you. After all, Freddie Mac’s weekly mortgage rate survey said average, 30-year fixed rate mortgages had dipped, dropping to 3.94% — the first time the average rate reported sub-4 percent.

A keen eye, however, revealed the another truth.

Yes, the average 30-year fixed rate mortgage did go sub-4 percent, but, in order to get those rates, applicants were suddenly required to pay 0.8 “discount points”. This is an increase of 0.1 discount points from the week prior, a change in loan cost thatr reduces the benefit of falling mortgage rates.

1 discount point is equal to 1 percent of your loan size.

All of that is history now, however,. Rates climbed each day last week and are now at their pre-Labor Day levels. The Refi Boom may not be over, but it may be stalled.

This week, mortgage rates may continue to climb. There is talk within the Eurozone that Germany and France will come to Greece’s aid, and that a plan will be solidified prior to November 3. This would boost stock markets at the expense of bonds, leading to higher mortgage rates.

In addition, last week’s strong employment data has renewed speculation that the U.S. economy is, in fact, healthy so analysts are now watching for Friday’s Retail Sales data.

Because consumer spending is an economic catalyst, if Retail Sales shows strength, mortgage rates should rise.

And, lastly, there is a 10-year Treasury auction Wednesday. Mortgage bonds don’t mirror the treasuries, but when demand is strong for treasuries, it’s often strong for mortgage-backed bonds, too. Therefore, a strong auction of government debt will help hold mortgage rates down.

A weak auction should lead rates higher.

Should I Refinance My Home?

October 11, 2011 by Jeff Cost

With mortgage rates at all-time lows, you may be asking “Is now a good time to refinance?”. This short interview from NBC’s The Today Show offers good insight.

Refinancing a mortgage is about more than just “low rates”. For example, there are costs associated with giving a new mortgage and even with the average, 30-year fixed rate mortgage near 4 percent, the costs of a such a move can outweigh the benefits — both in the short- and long-term.

The video originally ran in September when mortgage rates averaged 4.09%. Rates are different today, but the offered advice remains relevant.

Some of the key points raised include :

The lowest rates come with the highest costs. Consider a slightly higher-rate option from your bank.
Falling home values may make it harder to qualify for a refinance in the future. Your best time to act may be now.
If you’re many years into a 30-year loan, you can consider switching to a 15-year mortgage to avoid “resetting” your term.

And, lastly, the interviewee makes a strong point that your refinance should save you enough money to make paying the closing costs “worth it”. Make sure the break-even point on your closing costs versus your monthly savings occurs within a reasonable time frame.

At 4 minutes, the The Today Show video is short, but dense with quality information. For follow-up on whether a refinance makes sense for your situation, be sure to talk with your loan officer.

Retail Sales Expected To Rise; Mortgage Rates Should Rise, Too

What’s Ahead For Mortgage Rates This Week : October 11, 2011

Should I Refinance My Home?

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