Rate Lock Advisory

Friday, June 24th

Friday’s bond market has opened sharply higher as the markets react to Britain’s vote. The opposite reaction of a bond rally often is weakness in stocks and we are seeing plenty of it this morning. The Dow is currently down 376 points while the Nasdaq has lost 122 points. The bond market is currently up 50/32 (1.57%), which should improve this morning’s mortgage rates by approximately .375 of a discount point.

50/32


Bonds


30 yr - 1.57%

376


Dow


17,634

122


NASDAQ


4,787

Mortgage Rate Trend

Trailing 90 Days - National Average

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

Indexes Affecting Rate Lock

High


Positive


Geopolitical/Financial Issues

Well, the Brits did it. Surprising many in the financial world, Britain voted to break away from the European Union. That has caused turmoil in the global markets with stocks getting crushed in every relevant open exchange. This is great news for mortgage shoppers because scared stock investors usually shift funds into bonds for safety, hence the huge rally in U.S. bonds this morning. It also makes a Fed rate hike late next month highly unlikely. It also raises the possibility of them not acting the rest of the year.

High


Positive


Durable Goods Orders

There were two pieces of economic data posted this morning, but the Brexit news makes them irrelevant in today’s trading. May's Durable Goods Orders was first at 8:30 AM ET. The Commerce Department announced a 2.2% drop in new orders for big-ticket products such as electronics, appliances and airplanes. Analysts were expecting to see a decline 0.6%, so the news is favorable to bonds and mortgage rates. Even a secondary reading that excludes more volatile transportation-related orders (such as airplanes) came in softer than expected. The acceptable variance in this report is wider than most others because the data is known to be quite volatile from month to month, but we can still consider the data good news.

Medium


Positive


University of Michigan Consumer Sentiment (Rev)

The last event of the week was the University of Michigan’s revised Index of Consumer Sentiment for May just before 10:00 AM ET. It showed a reading of 93.5 that was lower than forecasts of 94.0 and a decline from the initial reading of 94.3. This means surveyed consumers were a little less optimistic about their own financial situations than many had expected. Because waning confidence usually translates into weaker levels of consumer spending and softer economic growth, this report is also favorable for mortgage shoppers.

High


Positive


None

Overall, enjoy today’s bond rally and downward move in rates. Some analysts are already downplaying the news and predicting it won’t have nearly an impact on the global economy as some are claiming. The future will tell us if today’s move was justified or if it was an overreaction. I believe the news is favorable for bonds, but am having a hard time justifying the reaction in the markets, especially when considering the recent downward spiral in bond yields leading up to it. That said, today is a good day for mortgage shoppers. However, please proceed cautiously if still floating an interest rate because the cause of the bond rally has come and gone. We won’t see the economic impact of Britain’s decision for some time. That allows plenty of time for profit-taking in bonds and a general correction.

Medium


Unknown


None

Next week is much lighter in terms of data and events that have the potential to affect mortgage rates. There are a couple of moderately important releases and one highly important release scheduled, but none come Monday. We may see weekend talk of Britain’s vote to carry into Monday’s trading and a rebound in stocks could help erase some of today’s gains. Look for details on next week’s calendar 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... 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.