Rate Lock Advisory

Thursday, October 17th

Thursday’s bond market has opened in negative territory following news that Britain and the European Union may have a Brexit deal or at least agreements on enough points to give hope a final deal is possible. The stock markets are showing gains with the Dow up 76 points and the Nasdaq up 46 points. The bond market is currently down 5/32 (1.76%), but we shouldn’t see much of a change in this morning’s mortgage rates.



30 yr - 1.76%







Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock



Fed Beige Book

Yesterday afternoon’s Fed Beige Book release was a non-factor for mortgage rates. It showed that the economy is slowing but still growing at a modest pace. Comments in the report refenced the trade war with China as a contributing factor to the slower growth and noted that manufacturers were starting layoffs in some regions. None of that was a surprise to the markets though, preventing much of a reaction once the report was posted.



Housing Starts (New Residential Construction)

The first of this morning’s two monthly economic reports was September's Housing Starts at 8:30 AM ET. The Commerce Department announced a 9.4% decline in new home groundbreakings, falling short of expectations. While the headline numbers appear to be good news for mortgage rates, the details in the data are not so much. This is because the decline is being attributed mostly to multi-family housing starts such as apartment buildings. New starts of single-family homes that are more relevant to mortgage rates actually rose last month. That forces us to consider the data negative news for rates.



Industrial Production and Capacity Utilization

September's Industrial Production data was released at 9:15 AM ET, revealing a 0.4% decline in output at U.S. factories, mines and utilities. This was a larger decline than expected, giving us another sign of manufacturing sector weakness. That makes the report good news for bonds and mortgage rates.



Geopolitical/Financial Issues

What is affecting bonds more than this data is the possible Brexit deal. It was widely believed that if Britain broke away from the EU without trade and other deals in place, it would be more disruptive to the global economy. What is bad for the economy is generally good news for bonds and mortgage pricing. Therefore, news of a smoother Brexit is being taken as unfavorable for bonds this morning. Fortunately, the response is somewhat modest so far.



Leading Economic Indicators (LEI) from the Conference Board

Tomorrow has a single fairly minor piece of data for the markets to digest with the release of September's Leading Economic Indicators (LEI) at 10:00 AM ET. This Conference Board index attempts to predict future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.1% from August's reading. This would indicate that economic activity is likely to remain fairly calm over the next couple of months. A small increase would not be of much concern to the bond and mortgage market. A large decline would be favorable to mortgage pricing.

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.