Commentary: Different day - same story.
Credit market participants are mesmerized by the European debt crisis, with its dozens of moving pieces, and its potential to topple governments, banks and to deliver a massive financial shock to the global economy. The systemic threats produced by this continental dilemma have actually reinforced the safe-haven appeal of U.S. dollar denominated assets like Treasury debt obligations and mortgage-backed securities - a condition exceptionally supportive of steady to perhaps fractionally lower mortgage interest rates. That is the good news.
Market rumors and speculation insinuating the countries composing the European Union may be on the verge of taking meaningful action to substantially reduce the likelihood of a broad based financial meltdown in the region is largely behind the upward pressure that has developed on mortgage interest rates since last week Friday. The likelihood that Greece will ultimately default on its sovereign debt is essentially already "baked-into-the cake" as far as most investors are concerned. If the disaster can be limited to Greece - as many analysts believe is possible - the European economy will likely recover at a decent pace. Against such a backdrop - one of the primary anchors holding U.S. mortgage interest rates at multiple decade lows will begin to slip. Such an event is not likely to occur in the next day or so - but if the probabilities begin to favor such an event occurring within the next three to six months - the upward pressure on mortgage interest rates will intensify. As I have mentioned in this space many times - mortgage investors live in the future, not the present. Heads up.
The Commerce Department announced earlier this morning that new orders for long-lasting manufactured goods slipped 0.1% in August after a 4.1% gain in July. The component of the report excluding transportation orders fell 0.1% as well. The bright spot of the report was the fact that non-defense spending capital goods excluding aircraft, a fancy name for a closely watched proxy for business spending, increased 1.1% last month after a 0.2% fall in July. All of this statistical mumbo-jumbo is strongly suggesting the manufacturing sector has not weakened nearly as much as some analysts had feared. The "take-away" from this report for many mortgage investors is that economic growth is slow - but has not yet turned recessionary -- and therefore the incentives to push mortgage interest rates notably lower remains minimal.
As they do every Wednesday, the Mortgage Bankers of America have released their Mortgage Application Survey for the week ended September 23rd. According to the MBA, overall mortgage application traffic jumped 9.3% higher during the week - lead by a solid 11.2% increase in refinance loan requests. The demand for home purchase loans edged 2.6% higher.
The contract rate for 30-year fixed rate conforming mortgages finished the week at 4.24%, down 5 basis-points from the prior week, down 12 basis-points from four-weeks ago, and down 34 basis-points from the year ago mark. Eight-out-of-every-ten loan applications taken last week represented a refinance request.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
