Mortgage Rate Report – February end of Month Update

I have not updated this post because over the past week and a half it has been a wild, wild ride. To put it in brief – interest rates have been rising and rising and rising! That trend continued to repeat over the past two to three weeks. So let’s get right to it – Why did this happen? Didn’t you begin this month with constant news that the FED cut rates and they are going down??

Yes, you did. As in my previous post the Fed Funding rate went down, and very probable to go down again. But what the news always fails to provide to the average consumer is the fact that mortgage interest rates almost always go in the opposite direction. Now over the past weeks not only did the interest rates rise, they rose a full 1% from the time period just before the Fed announcement. The Good News … What Goes up MUST COME DOWN!!!

 

Quick recap: February 13, 2008

As you know that the President signed the Stimulus Package on Wednesday, February 13th. Next, the release of Retail Sales Report led to deteriorated pricing and the volatility continued throughout the week!

The week’s Consumer Sentiment Report wasn’t too bad, translating into healthier corporate profits for the Stock Market and slightly higher Stock Prices. Couple this with passage of the (i) Economic Stimulus Package, (ii) Warren Buffett’s statements on helping insure municipal bonds and suddenly it appears there’s more economic health on Wall Street than previous months have dictated. What does all of this mean? The Stock Market outperformed the Bond Market this week. This meant higher interest rate pricing.

 

Quick recap: February 19, 2008

This week released Housing and inflation reports which meant increased market volatility. Not much of a surprise that lenders repriced interest rates through-out the trading day. Just when you thought mortgage rates might level off or head down, inflation pulls them back up. Well, some of them, anyway.

The benchmark 30-year fixed-rate mortgage rose for the fourth week in a row. It went up 1 basis point, to 6.57 percent, according to the Bankrate.com Rates on long-term mortgages would have dropped this week if not for the release Wednesday morning of the consumer price index for March. Core prices rose faster than Wall Street had been expecting, so long-term interest rates went up, too. But short-term mortgages fell on the news that the Fed might soon stop raising short-term interest rates.

 

Quick recap: February 25, 2008

Perhaps there is support from weak economic data, but even in the face of dismal inflation data, MBS are holding steady on the day.

This week data is actually trading up in positive direction which is truly amazing considering we’ve received some of the worst inflation numbers in over 20 years. The core Producer Price Index came in at .4%, double the expectation of 2%. This should have destroyed rates this morning, but it hasn’t. There are a couple mitigating factors.

The economy is obviously weakening hourly with more companies releasing bad earnings, a weak consumer, and a weak housing market.

Combine this with the somewhat exuberant and emotional sell-off yesterday and MBSs have a weapon with which to fight inflation today. Unfortunately, the inflation news is not good for bonds in the long run, but it is encouraging to see them holding their ground despite such a forceful blow.

In breaking news, as this is being written (and before major news outlets will get you this info), Consumer Confidence Numbers were just released at a five year low! This should help mortgage rates for the rest of the morning.

Stay Tuned … things are changing rapidly… check back for more updates!

Wilshire Weekly Mortgage Rate Update February 4, 2008

Where We’ve been:
Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading was volatile with most of the positive improvements coming early in the week. The anticipated Fed rate cut and mixed economic data sent bonds up and down the latter portion of the week. Unemployment was stronger than expected @ 4.9%, however payrolls fell 17,000. Stocks continued to bounce back posting additional gains following the Fed 50 basis point rate cut. Unfortunately this caused the demand for mortgage bonds to languish.

Where We’re At:
The good news is that despite the weaker demand the latter portion of the week, for the week, interest rates on government and conventional loans fell by about 3/8 of a discount point. The productivity data Wednesday will be the most important event this week. Factory orders and the Treasury auctions also have the real potential to cause mortgage interest rate volatility.

Where we’re Going:
Despite continued Fed rate decreases, the future of the US economy remains uncertain. The Fed is desperately trying to jumpstart the economy amid high commodities prices and the fear of inflation. Former Fed chairman Greenspan indicated last week that the Fed’s actions probably wouldn’t keep the economy out of recession. Usually economic weakness is good for bonds and bad for stocks. Unfortunately the bond market has been hit hard recently by huge losses from bond insurers and many investors fear the worst is yet to come.

Keep in mind that a Fed rate cut does not automatically mean mortgage interest rates will improve, as was evident following the last few Fed rate cuts. The Federal Reserve has direct control over the level of short-term interest rates. The Fed’s influence over longer-term interest rates is less certain. Former Fed chairman Greenspan hit upon this fact last week when he noted, “central banks have less and less power to influence long term rates.” Remember that the Fed cuts rates to help spur the economy. Usually funds exit bond holdings and enter stocks. This was exactly what happened over the past two weeks. Bonds fell pushing rates higher following the Fed rate cuts, while stocks showed strong gains.

Forecast:
The good news is that interest rates still remain very favorable. There is a very real possibility that longer-term mortgage interest rates could head lower if inflation fears subside and the economic weakness continues. However, lower rates are not a given. High commodities prices and liquidity concerns in the mortgage industry continue to weigh heavily upon the economy. Couple those concerns with reports of continued housing price declines and the short-term economic outlook looks dim.

Mortgage interest rates remain historically favorable and taking advantage of rates at these levels to lock in a low interest rate for years to come would be prudent. If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… This is only an opinion of what one may do if financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!