California Mortgage Rates May 2020

At the start of the month mortgage rates are near all time lows. Fixed mortgage rates are more attractive than adjustable rate mortgages for both refinance and purchase transactions. Overall mortgage application volume has been lower when compared to March and parts of April however it still remains higher than normal.

We're anticipating that mortgage rates will remain low throughout the month of May with 30 year and 20 year fixed rates being the most attractive terms.

The Economic Calendar And Mortgage Rates:

On Friday, May 1st, 2020 the ISM Manufacturing report came in higher than expected. Expectations were for a 36.1 reading however the report came in at 41.5 (last month it came in at 49.1). The report had no impact on mortgage rates. During the first full week of May we have the ISM-Non Manufacturing report, MBA Mortgage Market Index, ADP Employment report, weekly Unemployment claims, and the monthly jobs report.

The monthly jobs report has the potential to impact the direction of mortgage rates in May. Expectations are for non-farm payrolls to come in at 21 million jobs lost during April and an unemployment rate of 16%.

We'll also be keeping an eye on the weekly Unemployment claims. Last week claims declined and the market is hoping that trend continues. A number significantly below 3 million would be considered a positive for the economy.

The Fed And Mortgage Rates:

Many people believe that the Fed controls mortgage rates. However that is simply not true. Mortgage rates originate in the Mortgage Backed Securities (MBS) bond market. The Fed does have an influence over the MBS market and since mid March the power of the fed has been very influential over Mortgage Backed Securities.

The Fed announced they were going to start a new wave of buying MBS bonds to help keep mortgage rates low for homeowners and homebuyers. They also expressed deep concern about the economy which is another positive for the MBS market (bad economic views from the Fed is generally a positive for the MBS market and positive views on the economy are generally bad for the MBS market). 

It's important to avoid using the Fed as a major part of your mortgage strategy. Talk with an experienced Loan Officer and set up a strategy that will best take advantage of current market conditions.

Cash Out Refinance Mortgages:

If you are looking to take cash out of your home then you might want to move forward sooner rather than late. Banks like Wells Fargo and Chase have started to pull back as some lenders no longer offer cash out refinance mortgages. And the ones that still do are coming up with stricter guidelines which is making it harder to obtain a cash out mortgage.