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What’s Ahead For Mortgage Rates This Week : March 14, 2011

Monday, March 14th, 2011

FOMC meets this weekMort­gage mar­kets improved last week in a week of few eco­nomic releases. The one major data point — Retail Sales — showed stronger-than-expected, but mar­kets reacted mildly. The report’s strength was whis­pered in advance of the actual release; its read­ing val­i­dated Wall Street’s grow­ing faith in the U.S. economy.

Most action last week revolved around the Mid­dle East:

In response to these events, Wall Street con­tin­ued its flight-to-quality. Mortgage-backed bonds are now at their best lev­els since early-February. Mort­gage rates have improved 4 straight weeks.

Unfor­tu­nately for rate shop­pers, the gains have been mea­ger. Con­form­ing mort­gage rates have only dropped slightly.

This week, how­ever, the mar­ket could move in either direction.

The biggest news on tap is the Fed­eral Open Mar­ket Committee’s 1-day meet­ing, sched­uled for Tues­day. The Fed is expected to leave the Fed Funds Rate near 0.000 per­cent, but that doesn’t mean that mort­gage rates won’t change. The FOMC’s post-meeting press release will be closely scru­ti­nized on Wall Street. Any changes in theme, tone, or mes­sage will cause mort­gage rates to dart.

This week also marks the return of hous­ing data with Hous­ing Starts, Build­ing Per­mits, and Home­builder Con­fi­dence due for release. Hous­ing is believed to be key to the eco­nomic recov­ery so strength in these reports should lead mort­gage rates higher.

In addi­tion, sev­eral inflation-related data sets will be released includ­ing Con­sumer Price Index and Pro­ducer Price Index. Infla­tion is gen­er­ally bad for mort­gage rates and with gas prices ris­ing to a multi-year high, pres­sure will be on for mort­gage rates to rise.

Lastly, there’s Japan.

The nation’s earth­quake, tsunami, and (now) loom­ing nuclear threat will have impli­ca­tions on the global bond mar­ket. Mort­gage rates may ben­e­fit while the cri­sis remains unresolved. 

If you’ve floated a mort­gage rate over the past few weeks, it may be time to lock that rate down. Eco­nomic fac­tors should be push­ing rates higher, but geopol­i­tics and nat­ural dis­as­ters are keep­ing them low.

It’s a per­fect time to com­mit to a loan.

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What’s Ahead For Mortgage Rates This Week : February 28, 2011

Monday, February 28th, 2011

Employment data is released FridayMort­gage mar­kets improved last week as Wall Street’s con­cerns about the Mid­dle East trumped its fears of infla­tion. Con­form­ing and FHA mort­gage rates fell to a 3-week low.

Last week marked the sec­ond straight week in which mort­gage rates fell, a streak that fol­lows four straight weeks of climb­ing mort­gage rates.

It’s been a bout of good for­tune for rate shop­pers and home buyers.

In addi­tion, accord­ing to Fred­die Mac’s weekly mort­gage rate sur­vey, the aver­age spread between con­form­ing 30-year fixed rate mort­gages and 5-year ARMs has widened further.

The two bench­mark prod­ucts are now sep­a­rated by 1.15%. It’s the largest inter­est rate gap in recent his­tory; one that yields a monthly pay­ment dif­fer­ence of $68 per $100,000 borrowed.

This week, it’s unclear in what direc­tion mort­gage rates will go.

On one side, there’s ongo­ing unease related to protests in Libya and its neigh­bors, and that’s dri­ving safe haven buying. 

“Safe haven buy­ing” describes when investors flee risky sit­u­a­tions and put their money in the safest places pos­si­ble. Mort­gage bonds are one such place, so when safe haven buy­ing is in effect, bond demand is high so bond yields (i.e. mort­gage rates) fall.

On the other side, infla­tion is ramp­ing up.

Recent eco­nomic data shows that the econ­omy is expand­ing, and the Fed­eral Reserve is main­tain­ing its accom­moda­tive growth poli­cies. There­fore, this week, the key eco­nomic event will be Friday’s jobs report. if job cre­ation is high, expect infla­tion fear to re-ignite, and mort­gage rates to rise.

Another risk fac­tor for this week’s rate shop­pers is that ten­sions begin to set­tle in the Mid­dle East, or that Wall Street gets more com­fort­able with ris­ing oil prices. If that hap­pens, safe haven buy­ing will sub­side and mort­gage rates will resume rising.

There appears to be more rea­sons for mort­gage rates to rise this week than for them to fall. Plan accordingly.

If you have not locked a mort­gage rate yet, this week may rep­re­sent your last chance to get a low one. Talk to your loan offi­cer and make a plan.

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What’s Ahead For Mortgage Rates This Week : February 22, 2011

Tuesday, February 22nd, 2011

Safe Haven Buying Mort­gage mar­kets improved slightly last week, rebound­ing from the worst 1-week loss in recent his­tory. The gains were geopo­lit­i­cal, how­ever; the result of insta­bil­ity in the Mid­dle East region. Eco­nomic data was over­looked as investors made a broad-based flight-to-quality.

For just the sec­ond time in 2011, con­form­ing mort­gage rates fell on a week-to-week basis.

Rates shouldn’t have dropped, though. Here’s just a sam­pling of last week’s eco­nomic data, all of which can be tied to ris­ing mort­gage rates:

Fur­ther­more, the just-released Jan­u­ary FOMC Min­utes showed an improv­ing eco­nomic out­look from mem­bers of the Fed­eral Reserve.

There­fore, home buy­ers and rate shop­pers might con­sider last week’s rate drop a gift. With­out the grow­ing unrest in Libya, Egypt and Tunisia, mort­gage rates would have moved con­sid­er­ably higher.

Instead, rates fell in a bout of what’s com­monly known as “safe haven” buying.

In safe haven buy­ing, global investors shun risk in favor of safer invest­ments; usu­ally in response to mar­ket uncer­tainty. Ter­ror threats is one such event. Regime over­throw is another. Because the event’s long-term effect on mar­kets is unknown, investors choose to move cash to safer asset classes until the future is more clear.

The extra demand for such assets dri­ves prices up and, in the case of mort­gage mar­kets, dri­ves rates down.

Last week, rates fell because safe haven buy­ing was so strong. That may not be the case this week. As events play out across the globe, mort­gage rates at home will be affected.

There’s a lot of eco­nomic data set for release this week, includ­ing a large series of housing-related fig­ures. Stronger-than-expected data should cause mort­gage rates to rise, safe haven buy­ing notwithstanding.

If you’re still shop­ping for rates, or look­ing for a last chance to lock a low rate, now may be your best chance. Talk to your loan offi­cer about a rate-locking strat­egy early in the week. As the sit­u­a­tions abroad become more clear, mort­gage rates should start to climb once again.

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