Mortgage Rates Hold Steady

Thursday January 14, 2010

Following two days of improving consumer borrowing costs, mortgage rates took a small step back yesterday afternoon. Mortgage backed security prices moved higher early on in the day open which allowed many lenders to issue their best rates in over a month, however the gains did not hold up. Following the 10 year Treasury note auction and the release of the "Beige Book", MBS prices fell and many lenders were forced to reprice for the worse.

Economic data picked up today. First out was the weekly jobless claims report.

This data gives us three readings on the number of Americans who file for unemployment benefits.
1. Initial claims totals the number of first time filers for unemployment insurance
2. Continuing claims totals the amount of people who continue to file because they cannot get a job
3. Extended benefits total the number of people who are receiving emergency benefits beyond the traditional time allowed to collect unemployment insurance

Next we received the monthly Retail Sales report which shows the monthly change in the total receipts at retail stores. Since consumer spending accounts for a large majority of GDP, market participants track retail sales to gauge economic growth. The report indicated retail sales unexpectedly declined in the month of December by .3% following November's revised higher reading of a 1.8% increase. Economists had expected December retail sales to post a .5% increase. When excluding auto sales from the data, sales dropped more than expected by .2% when economists had fore casted a .3% increase. November's ex-auto sales data was also revised better to a 1.9% increase from the first reported increase of 1.2%. Even when excluding auto and gasoline sales, the numbers still disappoint declining .3%. All in all, this report is very disappointing as it was much worse than expectations.

I still favor floating your rate lock over the next few days.