Houston's Rate Sheet

Rate Watch

Fed cuts rate additional 50 basis points, short-term mortgage rates fall

Last week, the Federal Reserve’s FOMC board moved to cut their key interest rate an additional 50 basis points. The decision came just eight days after the Fed board cut their key rate 75 basis points in an emergency session. Following the Fed Announcement, the markets began a rough and tumble week of volatility. Jobless claims came in extremely high and the Employment Report’s numbers were weak. However, inflation moderated a bit as the Personal Consumption Expenditure (PCE) Index came down from the previous month and average hourly earnings rose only slightly by .2 percent. Also, the advance reading on Gross Domestic Product (GDP) for 4th quarter 2007 came in weak increasing only by .6 percent.

After the volatile week, mortgage rates remained unchanged to slightly down on the week. Bankrate.com’s overnight average on the 30-year fixed rate mortgage remained unchanged at 5.47 percent. Short-term rates faired a little bit better thanks to the Fed cut. The Federal Funds rate tends to have a much greater impact on shorter-term bonds. The 15-year fixed rate mortgage averaged 4.95, down from last week’s 5.98 percent. And the 5-year Adjustable Rate Mortgage (ARM) averaged 4.97, down from last Monday’s 5.09 percent.

This week’s economic calendar will be much more light than last week’s. The only items on the calendar are a slew of speeches given by the Federal Reserve’s Board of Governors. These speeches will obviously have an impact, depending on the opinions expressed. Other than that, the calendar is quite bear. Look for the markets to react more to geopolitical concerns and the movements in the overseas markets.

posted by Vincent Biondillo @ 2:09 PM