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6-07-19 BuyWise Mortgage Weekly Interest Rate Update

Welcome back to the BuyWise Mortgage Weekly Market Update. I’m Josh Lewis, certified mortgage consultant and broker-owner here at BuyWise Mortgage in Huntington Beach, California.

Hopefully, you’ve been following us, you know the format. We’re going to go through the 90-day trend. We’re going to look at national averages for mortgage rates. We’re going to show you how much we can save you with our broker rates here at BuyWise Mortgage.

Then we’re going to look at the news, the financial news that impacted interest rates this week. We’re going to do something a little different. I’m going to transition to the desktop, show some live dynamic charts for the technicals.

We’re going to look at that, we’re going to come back, we’re going to end up with our weekly lock and flow recommendations.

So, with that, let’s jump right in. The 90-day rate trend you will see over here we continue to trend down. For the most part this week we just trended sideways. After two weeks of rapid improvements in interest rates, the market, it kind of has to consolidate and digest that.

We were hitting some important levels of resistance for mortgage back securities, which we’ll see in the technicals. Hitting those, we just kind of backed off a little, traded sideways, and then some improvement again today kind of put us to the top of the range.

But until we break through that, we’re on a sideways sort of consolidation of the recent downtrend, but we do expect the longer term downtrend to continue.

What does that mean for actual interest rates? The 30 year fixed conforming loan is just above 4 1/8 at 4.133. The FHA is just below 4 3/8 at 4.332. And the VA at 3.918. For impractical terms, about 3.875.

How does that compare to what we have here at BuyWise Mortgage?

So the BuyWise Conventional… again, remember, always here no lender fees, no points, so that’s the rates that we’re quoting here. 3.875% on the Conventional.

If you’re in a high-cost area and the loans above $484,350 we’re at 4%. FHA and VA are identical. 3.25% on the standard balance, 3.5% on the high balance. And those are just amazingly good interest rates.

After we lost those a few years back, I didn’t know that we were ever going to get back into the low threes or the high threes for the conventional loan, and here we are again.

So, how does that compare to the national averages? Conventional loans were about a quarter percent better and again, remember those national averages factor in a little bit of points and fees. We have neither of those and we’re still about a quarter percent better on the interest rate.

Our FHA Interest Rates are over 1% better than the national averages. On a three, four, or five hundred thousand dollar loan that’s saving you thousands a year, plus the savings at the closing table with lower closing costs.

VA is about 5/8%, a little more than .5% percent, about 5/8% of a percent in savings. Again, real money here. Our average loan amount at BuyWise is about $400,000. Some of the inland communities further up north, maybe our loans are $250K, $350k, but even on the smaller loan sized in California, it’s going to save you a lot of money.

So, let’s take a look at the news and see what actually happened this week. The biggest market mover was the Weak May Employment Data. On Wednesday, ADP, the payroll company aggregates sort of data from their payroll services and they showed only 27 thousand new jobs were created last month. And that’s the lowest level since March of 2010, which was sort of the bottom after the great recession, so back to not really good levels in terms of job creation.

Non-Farm Payroll came out today from the government. 75 thousand jobs created. 180 thousand was what they were expecting or probably more accurately, say hoping for. To put it in context, just with population growth in the United States, we need 175 thousand to 200 thousand new jobs every month to keep the unemployment rate flat. So, while unemployment is really, really low, we’ve been bouncing around that 3.6%, 3.7% inflation.

We’re seeing some signs that we may be at the bottom and bottoming out in terms of inflation level is always been a pretty reliable predictor of recession moving forward. Just another one those indicators leading us to believe that probably in the next 12 to 18 months we’re going to be in a full-blown recession.

The GDPNow cast. The Atlanta Fed does a number, it’s not a forecast, it’s a nowcast, and what that does is they take into account all of the data released up to this point. They’re not predicting where it’s going to go in the future, they’re just bringing in all of the data up to this point and number is at 1.4% growth for GDP on the nowcast after that Weak Employment report today.

What does that mean? 2.5% to 3.5% growth is healthy, considered a healthy economy. 1.4%, it’s growing, but it’s pretty anemic. We have no resolution this week on tariffs with Mexico or China. Mexico is a lesser issue. China, we’ll see how that plays out over time, but the uncertainty around those issues is hurting the economy right now and stock markets.

So what did we see with stocks? They stabilized this week. Some of that pullback and consolidation in bonds helped. The other piece is now the markets have shifted from believing that we’re going to have the Fed increases throughout 19, 2019 and 2020 as the Fed had indicated and they’re believing we’re more likely to see rate cuts which would juice the stock market, so it’s kind of what we were seeing from the markets this week.

So, as I said, normally I do the static charts here. I’m going to jump over to my desk, show you some numbers there with some dynamic charts. Give us a little better look at what we’re seeing in terms of the technicals and what it’s likely to mean for the rates in the near term future. All right?

Okay, let’s take a quick look at the technical charts here. This is the 30-year Fannie Mae mortgage pack security, so if we look back here from about mid-April, we’ve started this run-up, but really took off here May 21st through June 3rd [inaudible 00:05:47] straight run up.

So what we saw over the last week was a little bit of the consolidation sideways trend. When you see this big run-up, markets never just go straight in one direction, so just consolidating those changes. The actual psychology of the market is on traders at the Chicago Board of Trade and they kind of have to wrap their mind around these gains and there’s other additional tentacle factors here.

The big one that we’re seeing here is this resistance level of the 23.6% Fibonacci retracement. I have a feeling that we’re going to move sideways or a little ways here before we get some type of economic news to a downside that’s going to push us through that. It will give way, but it may be a little bit of time, so we may have seen the best rates for a while.

Don’t expect them to get worse, but would not be surprised to see us bump around in this range here for a little bit of time.

So, let’s bump over here and also take a look at, this is the last year of the 10-year US Treasury. Mortgage bonds closely follow this. It’s not an exact relationship, but these will close, mortgage rates will closely follow the yield on the US 10-year treasury, so for most of last year we were in this little range chopping back and forth, back and forth, and then late fall yield popped up to their highest levels, so 3.25 or so on the 10-year treasury.

And then, as we saw in the beginning of November, big move down from that 3.25 to about 2.6 points. We’re at 5/8 improvements in interest rates and about a similar improvement in mortgage rates. And then when we saw sideways move all the way in through March and then we had another leg down. And then the sideways move here end of May and another leg down.

So what I’m saying is, we’re likely to see another sideways move before we begin this leg down, but we’ll keep a close eye on it, stay here for the weekly updates and we’ll keep you up to speed on it.

Last thing we want to look at here is the stock market. Remember stocks and bonds compete. When stocks are doing well, money comes out of bonds and goes into stocks, which forces rates higher. When stocks are doing poorly money goes back into bonds and pushes yields lower, so what have we seen here.

So we go back to last fall when rates improved a bunch, well first when they’ve gotten worse in the fall up to mid-fall stocks were doing very well. We kind of hit a high level here and all that improvement came while stocks were doing very poorly, so all those stocks recovered through the spring.

Rates continued to stay at their low levels and now we’re seeing another leg down, so the important thing to know right now, stocks are really expensive. They’ve had a long run up over the last seven, eight, nine years and are due for a pullback. That pullback will be positive for interest rates. Maybe not so great for your retirement accounts, but definitely good for mortgages, so that’s the technical view here for this week.

Okay, hopefully, you can see from the technical charts we definitely believe that we are in a longer-term downtrend in interest rates. Don’t expect them to fall off of a cliff, but I do expect projected slide down, so what does that mean? Means that we are definitely flying a green light for interest rates.

Don’t have a whole lot of risk or fear of rates getting worse, but we are at an important level of resistance. It’s probably going to take a while to break through that. We could see a protracted sideways trend as we saw a few months back.

What does that mean? It means our advice for anyone looking to refinance or even purchase right now is doing zero point loans. Most likely on the refinances doing no-cost loans. Typical refinance in California has about $200 in closing costs. We can credit those.

Get a lender credit and that way we have no sunk costs in your loan, so if 6 months, 12 months, 18 months from now rates are another quarter half, 3/4 of a percent lower, we have no sunk costs in that loan. It’s just a little bit of paperwork. We rewrite the loan at the new lower interest rates.

So hopefully you found this helpful. If you’re thinking of refinancing, thinking of buying, we would love to talk to you. We can answer any questions, we can get a full pre-approval for you. If you’ve talked to someone else and you just want a second opinion and another set of eyes, never a bad idea.

Probably the one common denominator I have when I have someone come to me complaining they’re in a bad loan or they had a terrible experience with a loan officer is they went with the first person that they talked to. Didn’t get a second opinion, didn’t compare those numbers, didn’t make sure they were in the right loan program.

I have no problem telling you, “Hey, this is a great loan. Someone’s taking good care of you. Keep going down that path. It’ll a least give you the peace of mind to know you’re in good hands.

So, we’d love to hear from you. All my contact info is on the next page. As always, thanks for joining us and we look forward to seeing 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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