MORTGAGE RATES DROP FOR 2nd STRAIGHT WEEK; BUT BE CAUTIOUS – July 18th, 2011

MORTGAGE RATES DROP FOR 2nd STRAIGHT WEEK; BUT BE CAUTIOUS:

The bond market finished last week 31 bps up, pushing mortgage pricing down for the 2nd consecutive week.

A well qualified borrower can get a 30 year fixed at 4.375% for about .6 points, and a 4.5% with 0 points. 15 year fixed rates at 3.75% are now at 0 points, and 20 year fixed rates at 4.25% are at 0 points.

Even though rates and pricing are improving, we are seeing a benchmark rate that the market is not going below. For example, you can get a 4.375% for .6 points, but then if we go down to 4.25%, the pricing goes up to over 2 points. The cost difference is so large that for most loan amounts it makes no sense to pay that much more in fees. The same goes for 15 and 20 year fixed rates. There is a large pricing increase below a 3.75% 15 year fixed and a 4.25% 20 year fixed.

This will be a pivotal week for the U.S. stock market which means this could be a volatile week for interest rates. 20% of the S&P 500 are reporting earnings and 50% of the DOW Jones are reporting earnings this week.

Many experts believe that corporate earnings will be quite good, but many investors are uneasy about the debt ceiling negotiations in Washington. If the debt ceiling gets resolved and corporate earnings are positive, look for the stock market to shoot up, which will usually cause rates to rise.

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