Rate Lock Advisory

Friday, September 30th

Friday’s bond market has opened in positive territory, hopefully closing the week on a good note. Stocks are fairly calm with the Dow down 44 points and the Nasdaq up 12 points. The bond market is currently up 19/32 (3.70%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.

19/32


Bonds


30 yr - 3.70%

44


Dow


29,180

12


NASDAQ


10,752

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

Medium


Negative


Personal Income and Outlays

August's Personal Income and Outlays report was the first of this morning’s two economic releases. It showed that personal income rose 0.3% and spending rose 0.4%. The income reading pegged forecasts, but spending came in higher than the 0.2% that was expected. These readings hint at economic strength with consumers having more money to spend and actually spent more than thought. Accordingly, we are labeling this part of the report neutral to slightly negative for mortgage rates.

High


Negative


Inflation News

Another reading in the report is not so murky. The Fed’s preferred inflation reading, the Personal Consumption Expenditures (PCE) index, was clearly bad news for bonds and mortgage rates. The overall PCE rose 0.3%, exceeding predictions of 0.2% while the more important core PCE jumped 0.6% when it was expected to rise 0.4%. From the Fed’s perspective, these readings indicate inflation is still on the rise and further aggressive measures (rate hikes) will be needed to get it moving lower. Since inflation erodes the value of a long-term bond’s future fixed interest payments and causes them to be sold at a discount to offset inflation, this part of the report is bad news for rates.

Medium


Positive


Univ of Mich Consumer Sentiment (Rev)

Second was the University of Michigan's revised Index of Consumer Sentiment for September at 10:00 AM ET. They announced a reading of 58.6, down from the initial estimate of 59.5 from two weeks ago. The downward change is a sign that surveyed consumers were less optimistic about their own financial situations than earlier this month. Waning confidence usually translates into weaker consumer spending levels, making the data good news for bonds and mortgage rates.

High


Unknown


ISM Index (Institute for Supply Management)

Next week doesn’t have a large number of reports scheduled, but most of what is set for release is expected to heavily influence rates. The batch includes the traditional new month reports of the ISM manufacturing index Monday and September’s almighty monthly Employment report Friday. As we saw this week, it doesn’t take surprisingly strong or weak economic news for the markets to get volatile. We will also be watching the geopolitical events that were the strongest force behind this week’s movement in rates. Look for details on all of next week’s activities in Sunday evening’s weekly preview.

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... Lock 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.


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