4-26-19 BuyWise Mortgage Weekly Interest Rate Update

Welcome back. I’m Josh Lewis, certified mortgage consultant and broker/owner at BuyWise Mortgage here in Huntington Beach, with your weekly mortgage market update for April 26th, 2019.

Our last update here of April. On the surface here, it’s going to look like not a whole heck of a lot has happened. We had another relatively flat week in interest rates, but if you’re a data nerd like me and you stick around until the end, there are some interesting technicals and it definitely portends good news for mortgages and interest rates going forward.

As always, we’re going to start by taking a look at the 90-day rate trend, looking at national averages, showing you how much money we can save you here at BuyWise Mortgage as a broker, and then we’re going to look at the fundamentals.

What happened in the news this week that moved markets and will move them, moving forward. We’re going to look at the technical charts. We’re going to look at the 10 Year Treasury, we’re going to look at mortgage-backed securities, and we’re going to look at the S&P 500 and see what that can tell us about the future direction of rates. Let’s jump in.

As I said, on the surface, this chart looks like not a whole heck of a lot has happened. We had a really flat week. Some rates a little bit better, some a little bit worse, but essentially flat over the last week. Mortgage-backed securities have improved a little bit, but not enough really to impact interest rates.

You can see that from the chart here. Just basically sideways over the last three weeks or so. Where does that leave us on the national averages? The national average through the Optimal Blue Mortgage Market Index for rates locked yesterday was 4.458% for 30 year conforming loans. For FHA loans, 4.647%. On VA’s, a little bit lower at 4.307%.

How does that compare to us here at BuyWise?

On the conventional side, conforming loans at 4.125%. High balance, those above $484,350, are 4.375%. Those are zero points, zero lender fees, unlike most of the rates in the Optimal Blue Mortgage Market Index that includes some combination of points and fees in there. That compares to the national average, it’s about a third of a percent better, .333% exactly, this week.

On FHA loans, we’re at 3.625% and 3.875%. If you’re paying attention, that is a little bit over 1% better than the national average.

A huge difference, as always, on government loans. With the VA, standard balance VA at 3.75%, high balance VA at 4.00%. That’s just a little more than a half percent better than the national average. $300,000 loan at a half percent better, you’re talking about $1,500 a year. More than $100 difference in your monthly payment in your pocket.

What happened this week to move the market? We had some mixed reports on housing, but actually really good news. A weak existing home sales, and then a really strong new home sales. In the weak existing home sales report, was primarily due to some weather events in the Midwest in the early part of the year, so actually really good, positive news.

Housing remains solid. Not going to the moon, but with the low-interest rates and good affordability in most parts of the country, home prices are still going up and we have a pretty tight supply of inventory of homes for sale. We also had some notes in the market of strong Asian buying of US treasuries that technically it improved after we had failed on the 10 Year Treasury at 4.6.

We have some technical improvement, and the note was that we’ve seen a lot of Asian investors buying strongly into the treasury market. We had a hot quarter one GDP read today. It caused stocks to bounce higher, but at closer look it was a lot of smoke and mirrors.

The actual headline number was great, but the underlying number was pretty weak for Q1 GDP. That was the advanced numbers. We’ll get another look at that next month with some revisions, likely to be downward revisions.

We had a lot of technical improvement. We’re going to see that in the charts. Before we get into that, wanted to point out next week is a real data heavy week and it should move the market one way or the other.

The way that technicals are setting up, it’s looking like we’ll see some improvement, but depending on the news next week, we’ll see where that goes. We have a Fed meeting with a policy statement and a press conference afterward. We have personal income data coming out, which obviously could lead towards inflation, the Fed’s preferred measure of inflation in the PCE.

We have consumer confidence coming out, and then the March employment report on Friday. Next week, we’ll have a lot of news that’ll move the markets.

Let’s take a look at where we’re at. If we look here at the Fannie Mae 30 year over the last three months, that red line that you see there is a downtrend line in prices. As mortgage bonds decrease in price, the yields go higher. Although not super high, over the last three weeks or so, we’ve had some pressure on interest rates that’s made us sideways to slightly worse.

What you can see there, we broke above that in bond prices and also above the dual resistance at the 25-day moving average and the 50% Fibonacci retracement. With those two numbers, looking positive for us in the near term, depending on that news next week.

We roll over to the 10 Year Treasury, we can see the opposite. This is actually treasury yields here, so we want to see the yields going down. That red line shows that over the last three weeks or so, treasuries had gone up and tested from a low of 4.34 on the 10 Year Treasury up to testing that level at 4.60.

When that failed, it looks like we’re going to make another run back down and take a shot at that 4.34. A lot will depend on the news that comes out next week. The last chart here, don’t usually show this, but it is important to note that stocks and bonds do compete.

It is hard for bond prices to go up and interest rates to go down. Although not impossible, as we’ve seen. It’s hard for interest rates to improve as the stock market is rallying, and what we’ve seen here, if we look, this is over the last six months in the S&P 500, a strong rally.

We’ve seen a big bear market last quarter of last year. As interest rates started improving, the stock market had improved as well. It also looks like that downtrend line may be failing. Not definitely calling for stocks to get worse, but it’s something for us to take note of. If we see a correction after this long run up in the S&P and other stock indexes, it will be good for interest rates.

Where does that leave us? What is our recommendation for this week? Cautiously optimistic. I would put up the yellow caution sign for this week. The yellow caution light for the week. If you’re in escrow or closing shortly, rates are good.

Take advantage of it. If we’re looking of where things are likely to go in the future, I think we’re going to make another test at 4.34 on the 10 Year Treasury and that’ll give us another eighth to a quarter percent better in interest rates, and then we’ll have to see where it goes from there.

Hopefully, you found this helpful. If you have any questions, you want us to run numbers on your situation, give us a holler. All my contact information is on the next screen. As always, thanks for joining us, and we hope to see you next week.

Josh Lewis

For 20 years, Josh Lewis, a Certified Mortgage Consultant, has worked with home buyers and their professional advisors to assure that homeownership is a key foundation to long term wealth creation by creating and implementing custom tailored mortgage plans that minimize ownership costs while maximizing wealth accumulation.
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