Rate Watch
Mortgage rates fall, after Government takeover of Fannie Mae and Freddie MacForget last week’s economic calendar, it is now irrelevant. On Saturday, the Treasury Department announced that it would be taking over Fannie Mae and Freddie Mac. This is gigantic news for the mortgage markets, as Fannie and Freddie are the largest mortgage makers in the US. To be more precise, they are the mortgage market in the US. With this take-over, mortgage backed securities are now explicitly backed by the Federal Government. Since the US has the best credit rating in the world, this is going to really help to push interest rates down considerably.
As of this morning, Bankrate.com’s
overnight average on the 30-year fixed rate mortgage is down to 6.08%, down from last Monday’s 6.26%. Other products followed. The 15-year fixed rate mortgage fell to 5.62%, down from 5.77%. And the 5-year Adjustable Rate mortgage fell to 5.78%, down from last week’s 5.92%.
The Fannie/Freddie news will probably have an impact for the rest of the week. Mortgage rates will more than likely continue to fall, as the market searches for a bottom. After the market finds a bottom, economic data might start having an impact. On Friday, there are 2 reports to watch, the Producer Price Index (PPI) and the Retail Sales report. PPI measures wholesale inflation in the US. Investors will be looking to see if falling oil prices have helped to moderate inflation. Although PPI is not as impactful as the Consumer Price Index (CPI), this will be a good predictor of next week’s CPI report. The Retail Sales report measures the performance of the nation’s cash registers. Since consumer’s make up two-thirds of economic activity, this report is an important indicator of economic health.
Mortgage rates will probably remain volatile through the week. It probably won’t take the market any longer than a couple days to find a bottom. After that, borrowers should look to lock in their rates and take advantage of these lower rates.
Rate Sheet
Mortgage rates fall on falling inflation fearsFor the past couple of weeks, there has been a significant change in attitude regarding inflation. Commodity prices across the board from Oil to Corn to Natural Gas have been in decline. Since, these rising commodity prices have contributed significantly to higher prices for all goods, there decline is a welcome development.
Last week, this change in attitude was apparent with the release of the
Personal Consumption Expenditure (PCE) Index. The PCE Index is the Federal Reserve’s most watched inflation metric, and the market follows its movement very carefully. Last week, the PCE Index showed that inflation remained quite hot in the month of July at .6 percent. Since, the Fed is typically targets inflation around .2%, this number should be of great concern. However, the news did not drive mortgage rates any higher. Rates continued to decline through the news and into today. This development provides us with an indication that investor fears with respect to inflation are moderating. This is great news for mortgage rates, and great news for the bond markets.
Last week, Bankrate.com’s
overnight average on the 30-year fixed rate mortgage came in at 6.26%, down from the previous Monday’s average of 6.33%. The 15-year fixed rate mortgage followed, averaging 5.77%, down from 5.85%. Adjustable rate mortgages did not fair as well. The 5-year Adjustable Rate Mortgage rose to 5.92%, up from last week’s 5.89%.
Although, Labor Day makes it a short week, this week’s economic calendar could have a big impact. On Friday, the most important economic indicator of the month, the
Employment Report will be released. 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. Since consumers make up 2/3s of economic activity, this report is considered a significant measure of economic health. If the numbers for August are strong, it could help push rates up. If not, we can expect that rates might continue to decline.
Besides the Employment Report, there will be several speeches given by members of the Federal Reserve Board. Also, the
ISM- manufacturing report and the
Factory Orders report will be released. Both of these reports will provide us with some insight into the US manufacturing sector.
