Houston's Rate Sheet

Mortgage Rates rise, as economic outlook improves

Dude, where's my recession? That was the question going through many pundits’ minds this past week. Since, the beginning of the mortgage crisis, many talking heads and politicians have predicted the worst recession since the Great Depression. Well for now at least, those prognostications appear to be false. On Thursday, the 2nd reading of 1st quarter Gross Domestic Product (GDP) came in much stronger than expected. According the GDP report, which is the largest broadest measure of economic activity, the economy grew 1% in the 1st quarter of 2008. Obviously, this is anemic growth by most standards. However, considering the economic problems mounting over the past year, this small growth is a sign of the resilience of American economy.

In response to the report, investors began to move their money from the relative safety of the mortgage bond markets to more risky investment options such as the stock and equity markets. This pushed mortgage bond prices down, which in turn moved mortgage rates much higher. This morning, Bankrate.com's overnight average on the 30-year fixed rate mortgage had risen to 5.98 percent, an 18 basis point increase from last Monday's 5.80 percent. Other mortgage products moved in a similar direction. The 15-year fixed rate mortgage averaged 5.57 percent, up from 5.36 percent. And the 5-year Adjustable Rate Mortgage rose to 5.41 percent, up from last week's 5.21 percent.

This week will start out slow. However, it ends with a bang. On Friday, the biggest economic report of the month will be released, the Employment Report. The Employment Report measures how many people are looking for jobs, how many have them, what they're getting paid, and how many hours they are working. These metrics provide an important picture into the health of the economy. If it is shown that unemployment or wage inflation are on the rise, Mortgage rates will most certainly continue to increase. If the opposite is true, then mortgage rates may begin to come back down. It is highly recommended that borrowers lock their interest rates prior to the release of this report.