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!