Buyers look to lock in as rates jump

by Kelli Rogers30 May 2013
Mortgage rates last week rocketed to their highest level in a year, and the jump may see prospective buyers get off the fence in a bid to avoid future rises.
Interest rates on fixed 30-year mortgage rates surged 12 basis points to average 3.9% in the week ended May 24, the highest level since May 2012, according to the Mortgage Bankers Association (MBA).
The rise sent the seasonally adjusted index of mortgage application activity down 8.8% as refinancing applications fell 12.3%, but the gauge of loan requests for home purchasesrose 2.6%.
Scott Schang, branch manager of Broadview Mortgage, said the trend shows potential homebuyers may be rushing to lock in cheaper rates. 
“Rising rates gets people off the fence and fires up those that were waiting for the ‘lowest rate.’” Schang said.
Today’s GDP revision is actually very key as well, said MBS Authority Senior Bond Analyst Bryan McNee. If it is inline with market expectations and shows growth above 2.5% then it will hurt pricing.
Friday will see two other important reports: consumer sentiment and Chicago PMI.  
“If consumer sentiment follows the same trend as this week's consumer confidence report, it will pressure pricing,” McNee said.“Also, the last Chicago PMI came in below the very important 50 level.  Look for that to climb back above 50,whichis also negative for bonds.”
Non-farm payrolls will also be something to watch for, but even if NFP disappoints, look for any gains in MBS to be very temporary, McNee said. 


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