Rate Watch
Mortgage Rates finish up after another volatile weekLast week's mortgage market was very volatile yet again. The stock market showed new signs of optimism, and many investors moved their money from the bond/mortgage markets into the stock market to take advantage of the new gains. This dynamic forced mortgage rates to move up slightly on the week.
Besides the stock market rebound, there was good economic news on a variety of fronts. Both the
Existing Home Sales and
New Home Sales data provided varying degrees of positive news. Existing Home Sales rose in the month of February, and although, New Home Sales were not positive, it appears New Home Sales prices are leveling off.
On Friday, the
Personal Consumption Expenditure (PCE) price index rose only .1 percent in the month of February. The PCE price index is the Federal Reserves most liked reading on inflation, and .1 percent is well within the Fed's .2 percent inflation goal. This news may help to bring mortgage rates down slightly early this week.
This morning, Bankrate.com's
overnight average on the 30-year fixed rate mortgage rose to 5.75 percent, up from last Monday's 5.62 percent. The 15-year fixed rate mortgage rose to 5.27 percent, up from 5.09 percent. As has been the case with Adjustable Rate Mortgages (ARM) for the past few weeks, the 5-year ARM program moved in the opposite direction. The 5-year ARM fell to 5.67 percent, down from last Monday's 5.73 percent.
This week, the
Employment Report, the mother of all economic reports, will be released. The Employment Report provides investors with a wealth of information regarding how many people are looking for jobs, how many have them, what they're getting paid and how many hours they work. These numbers can really move markets and change the dynamics of investor confidence. If the employment numbers come in strong, there could be renewed optimism in the stock and equity markets which could help to push mortgage rates higher. Borrowers could be at risk, if they plan on leaving their rates unlocked through the release of this report.
Another event to watch this week is Federal Reserve Chairman Ben Bernanke’s testimony in front of Congress on Wednesday and Thursday. Investors will be looking for indications of the future direction of Fed policy, as well as the Chairman's opinions with regard to inflation and the state of the economy.
It could be another volatile week, so borrowers should lock rates as soon as possible.
Rate Watch
Fed cuts rates in volatile week and mortgage rates move downwardLast week, the mortgage market was extremely volatile. Mortgage rates moved up and down with the ebb and flow of shifting economic optimism. On Tuesday,
the Fed held back a bit deciding to cut overnight rates by 75 basis points, rather than 100 basis points that was expected. Inflation could have been a reason for the pull back. The
Producer Price Index (PPI), which was released earlier that morning, showed a .5% increase in prices paid to US producers for their goods. Despite inflation and the Fed's conservative rate cut, the stock market reacted very well. However, the stock market began to backslide on Wednesday and Thursday, as poor
Jobless numbers and a poor
Philadelphia Manufacturing survey reminded investors that the economy might not be on the rebound yet. However, a debate regarding whether we have hit an economic bottom has begun, which I imagine is better than no debate at all.
Mortgage rates were prushed down, after it was announced on Wednesday that the
Office of Federal Housing Enterprise Oversight would lift special capital restrictions that have been put in place for both Fannie Mae and Freddie Mac. This action will allow Fannie and Freddie to buy additional mortgage bonds, which will pump $200 Billion into the mortgage market. This anticipated increase in demand was very good news for bonds and mortgage rates, which immediately improved on the news.
After an up and down week, mortgage rates finally finished down. Bankrate.com’s
overnight average for the 30-year fixed rate mortgage fell to 5.62 percent, down from last week’s average of 5.89 percent. The 15-year fixed rate mortgage also finished down. The popular refinance product averaged 5.09 percent, down from last Monday’s 5.22 percent. Adjustable Rate Mortgage (ARM) rates moved in the opposite direction. The popular 5-year ARM program averaged 5.73 percent, up from last week’s 5.70 percent.
The week ahead will more than likely continue to be volatile. Monday and Wednesday will provide us with readings on
Existing and
New Home Sales respectively. These reports will have added significance, as investor try to find a bottom in the housing market. The
Durable Goods Orders report, which measures the sales performance of goods like cars, boats, and large appliances which have a long usage life, will be released on Wednesday. If any of these reports show signs of a further weakening economic picture, then mortgage rates will probably continue to fall. However, if the economic picture becomes more positive, mortgage rates could rise quite quickly.
The other big economic report to watch is the
Personal Consumption Expenditures (PCE) price index to be released on Friday. As we’ve stated before, the PCE Price Index is the Fed’s favorite measure of inflation, and inflation eats away at the value of bonds. So if the PCE Price index comes in high, mortgage rates will most certainly rise and many will question the wisdom in further rate cuts. All-in-all it could prove to be another volatile week.
Rate Watch
Economic Woes and low inflation help lower mortgage ratesLast week was another rollercoaster ride in the financial markets. The equity markets initially looked to be turning around, as the Federal Reserve together with five other central banks including the European Central Bank (ECB) moved aggressively to free up the credit markets. The central banks made available $200 billion in a new financial instrument called a 28-day Term Securities Lending Facilities (TSLF). These TSLFs will allow large financial institutions to borrow from the Fed using a variety of collateral including prime rated mortgage-backed securities. The introduction of this program was well received in the markets and helped spur some optimism in the economy. In addition, many big names, such as Standard and Poors, stated that the subprime crisis was almost over.
However, the market’s optimism was fleeting. On Friday, it became known that Bear Stearns, one of the largest investment banks and brokerage firms in the world, was close to a complete collapse. In a move not used since the 1930s, Bear Stearns received an unknown level of 28-day emergency funding through JP Morgan Chase in a deal backed by the Fed. The deal was an attempt to stave off a Bear Stearns collapse, until a deal could be made for its acquisition. Today, it was announced that JP Morgan Chase had bought Bear Stearns for $236 million, which equates to approximately $2 per share. On March 14th, Bear Stearns' closing price was $30 a share.
Also on Friday, the
Consumer Price Index (CPI) showed a complete absence of inflation. Both the headline number and Core CPI, which excludes food and oil prices, came in at 0%. This is great news for the bond markets, because inflation eats into the yields of bond securities. And it was good news for the Federal Reserve, because it helps to bolster their policy of lowering interest rates to help spur economic growth.
With lower inflation and continued economic uneasiness, mortgage rates looked like a good investment to a lot of investors, as money fled from the equity markets to the bond markets. This morning, Bankrate.com’s
overnight average on the 30-year fixed rate mortgage came in at 5.89 percent, down from last Monday’s 6.09 percent. The 15-year fixed rate mortgage followed. The popular product for refinances fell to 5.22 percent, down from last week’s 5.49 percent. Short-term interest rates rose. The 5-year adjustable rate mortgage came in at 5.70 percent, up from last week’s 5.35 percent.
This week will include two very important events. First, on Tuesday, the
Producer Price Index (PPI) will be released. PPI measures the price changes that American producers get for their goods. The markets will be looking at this report to see if last week’s CPI report was a fluke or not. Also on Tuesday, the Federal Reserve’s
FOMC Board will meet to discuss its next action. It is expected that the Fed will cut their Federal Fund rate 75 basis points. This move will hopefully spur the economy and boost the stock market a bit. However, if the stock market moves higher, then it will probably have the effect of pushing mortgage rates back up as investors move their money back into the stock market.
After these two events, the economic data will be limited and market activity will probably slow, as we approach Good Friday. The markets and most financial institutions will be closed on Friday in observance of the holiday.
Rate Watch
Volatile mortgage rates finish upAfter another volatile week in the mortgage markets, mortgage rates end higher yet again. From Monday to Thursday, the 10-year Treasury fluctuated from 3.59 percent 3.70 percent. The volatility was caused mostly by fears regarding inflation, and it continues to be a concern. On Wednesday, the
Federal Reserve's Beige Book, which compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts, showed that inflation continues to be on the rise. Both the 10-year Treasury and the 30-year mortgage reacted very negatively to the news.
On Friday, mortgage and bond rates were finally curbed a little by the release of February's
Employment report. It showed an economy in the midst of a recession. The economy lost 63,000 jobs, mostly in the Manufacturing and Construction sectors. The worsing economy appears to have trumped inflation fears as mortgage rates came down slightly on the news.
This morning, Bankrate.com's
overnight average on the 30-year fixed rate mortgage came in at 6.09 percent, up 29 basis points from last week's 5.80 percent. Other products followed. The 15-year fixed rate mortgage averaged 5.49 percent, up from last Monday's 5.16 percent. And the 5-year Adjustable Rate Mortgage averaged 5.35 percent, up from 4.94 percent.
This week, the big news will come from Thursday's
Retail Sales Report and the
Consumer Price Index (CPI), scheduled for release on Friday. The Retail Sales report will provide either evidence of further economic decline or a hopeful rebound. The Consumer Price Index will provide us with further evidence of inflation or not. Both these reports will set the tone for next week's Fed meeting. It is presumed the Fed will cut interest rates another 50 basis points on March 18th.
