Understanding Mortgage Rates | dripp inc | Home Equity | Refinancing and Remortgage Guide

Good Afternoon,

Today’s 10-year bond yield open higher, but eased right back down after the gloomy picture that was painted by Labor Department and the Institute for Supply Management this morning. Mortgage interest rates will most likely remain at yesterday’s lows with a slight chance for improvement.

Here is what’s going on:

There were 2 reports I was anticipating today: The ISM Manufacturing Index and the Employment Situation.

The ISM measures employment, production, new orders, supplier deliveries, and inventories for more than 300 manufacturing firms. It gives a very detailed look at how busy and where things are headed in manufacturing sector of the economy. The actual figures were slightly higher than expected but by a very small margin. Reduced spending has been hurting manufacturers in the U.S., but since the difference was not by a big margin it did not really hurt Bond Trading.

ISM (Institute for Supply and Management)
- Expected: 49.2
- Actual: 50.0

In regards to the Employment Situation, there are 4 indicators that are looked at by analysts. This monthly report can really stir things up in the market because if people are not working, people are not producing and people are not spending. That discourages investors from investing in the stock market because it is an indication of a weakening economy. They are more apt to throw the money into a safer environment, bonds. This helps to lower mortgage interest rates. However, today’s results were not far off from the analysts forecast, so I do not expect much change.

Here are the important 2 out of the 4 indicators that have the biggest effect on trading.

1) Nonfarm Payrolls (Month-to-Month Change)
- Expected: -72,000
- Actual: -51,000

2) Unemployment Rate (Level)
- Expected: 5.6%
- Actual: 5.7%

Simply Put: Today’s mortgage interest rates will most likely stay at yesterday’s low levels with a slight chance of improvement. U.S. Manufacturing and Employment information were very close to what analysts predicted, so the market will probably remain flat today. There are a few important economic reports next week that I will list on Monday morning. I have a feeling that we may see lower rates. However, if you are buying or refinancing a home now, lock in your rate today. Keep it safe because with the current volatility our economy faces, rates can shoot up fast.