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.
Rate Watch
Mortgage rates move up on inflation concernsAnother volatile week in the mortgage markets came to pass last week, and the volatility started real early. On Monday at 8am, it was shown that the
Personal Consumption Expenditures (PCE) price index had risen .6% in the month of July. The figure was .1% higher than Wall Street Estimates. Inflation news is always bad news, and mortgage rates moved much higher on the news.
On Tuesday, the Federal Reserve made the announcement that it would keep their key interest rate unchanged. In the statement that followed the
FOMC meeting, the Fed balanced their concerns regarding inflation and economic slowdown. The Fed did state that they expect inflation to moderate later in the year. Their prediction was timely. By Tuesday afternoon oil prices and commodity prices continued their descent. As of this morning, the price per barrel of oil had fallen below $114 for the first time since May. Rising Oil prices have been a major factor in rising inflation in the US.
After significant gains early in the week, mortgage rates began to moderate and slowly decline as the Oil prices fell. However, by weeks end, rates were still up on the week. This morning, Bankrate.com’s
overnight average on the 30-year fixed rate mortgage came in at 6.43%, up from last Monday’s 6.31%. Other products followed. The 15-year fixed rate mortgage averaged 5.95%, up from 5.85%. And the 5-year Adjustable Rate Mortgage increased 4 basis points to 5.87%.
It is expected that this week will be just as volatile as last week. There are 2 big reports on this week’s calendar, the
Retail Sales report and the
Consumer Price Index (CPI). On Wednesday, the Retail Sales report will reveal the performance of the nation’s cash registers for July. Since, consumers make up two-thirds of economic activity, this report is a big indicator of economic health. On Thursday, the CPI report will report on consumer Inflation for July. As seen last week, inflation continues to be a big concern.
Mortgage markets continue to be very volatile. Borrowers should lock in their rates as soon as possible.
Rate Watch
Despite better than expected Employment numbers, Mortgage rates fallGood news is not always good news. Last week’s
Employment Report was better than expected, but Wall Street investors didn’t take the news very well. The economy lost 50,000 jobs in the month of July, which was well under the 75,000 expected on Wall Street. Most of the job loss came from declines in the construction and manufacturing sectors. As a result of the losses, the rate of unemployment rose to 5.7%, the highest level since January 2004. The stock market was not very happy with the news, and mortgage rates fell thanks to the bad feelings.
As of this morning, Bankrate.com’s
overnight average on the 30-year fixed rate mortgage fell to 6.31 percent, down from last Monday’s 6.41 percent. Other programs followed. The 15-year fixed rate mortgage fell 12 basis points to 5.85 percent, and the 5-year Adjustable Rate Mortgage (ARM) fell to 5.83 percent, down from last week’s 5.92 percent.
This week’s big news will be the Federal Reserve’s
FOMC meeting. It is fully expected that the Fed will keep their key interest rate unchanged. Oil prices have fallen over the past couple of weeks, so the concerns regarding future inflation have subsided a bit. The statement to follow the Fed’s decision will probably have some weight. Most investors believe the Fed will keep rates unchanged until much later in the year.
It is hard to predict where rates might go after the meeting. If investors are convinced by the Fed that inflation concerns are subsiding, then mortgage rates could fall. As of this morning, inflation concerns were a little higher due to the results of the
Personal Consumption Expenditure (PCE) price index. The July PCE price index came in at .8%, which was higher than the .5% May number. It was not well received by the markets, but mortgage rates are under control at the moment. Borrowers should probably lock at their earliest opportunity. Mortgage markets will more than likely be very volatile after the meeting.
Rate Watch
Mortgage rates hold tight, after rough week prior
Not much movement in mortgage rates last week. Since rates had moved an astonishing 33 basis points in the week prior, it was a welcome event. Although flat on the week, mortgage rates were quite volatile during the week. Economic reports gave mixed signals regarding the direction of economic growth. On Thursday,
Existing Homes Sales were lower than expected, but Friday’s
New Home Sales reported higher than expected numbers. Friday’s
Durable Goods Orders came in higher than expected as well. Oil Prices moved down on the week, which helped relieve some fears regarding inflation. All-in-All investors seemed to not have any greater sense of the economy’s state than it did at the beginning of the week, and mortgage rates reflected it.
This morning, Bankrate.com’s
overnight average on the 30-year fixed rate mortgage came in at 6.41 percent, down 1 basis point from last Monday’s report. Other products moved slightly more. The 15-year fixed rate mortgage moved up 3 basis points to 5.97 percent. The 5-year Adjustable Rate mortgage rose to 5.92 percent, up from last week’s 5.85 percent.
With the release of July’s
Employment Report, this week will most surely be more interesting than last week. As we have stated many times before, the Employment Report is considered to be the most important economic report of the month. In it, we discover how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. The answers to these questions help investors gauge the future direction of the economy.
Also, this week, the first reading of 2nd Quarter
Gross Domestic Product (GDP) will be released. Of all the reports, GDP represents the broadest reading of economic activity. Due to its size, it usually takes the government a little time to get everything correct, so this will be the 1st of 3 releases of these numbers. The 1st release usually has the most impact. Wall Street estimates that the economy grew 2.4 percent in the 2nd quarter.
Mortgage rates could move in either direction. Investor sentiment could move drastically based on the results of the Employment and GDP numbers. Borrowers should remain diligent and lock in interest rates at their earliest opportunity.
Rate Watch
Mortgage rates rise to highest levels of the year
This time last week, things weren’t looking to bad for borrowers. Mortgage rates had been down for 3 out of the last 4 weeks. Although the economy looked to be floundering, it was a great time to lock in rates. Oh, what a difference a week makes? Mortgage rates have now moved to their highest level in 3 years. It was the largest 1 week increase we have seen all year. According to Bankrate.com’s overnight average, the 30-year fixed rate mortgage moved from last week’s average of 6.09 percent to an astonishing 6.42 percent. Other popular products did not fair any better. The 15-year fixed rate mortgage rose to 5.94 percent, up from 5.63 percent, and the 5-year Adjustable Rate mortgage rose to 5.85 percent, up from 5.51 percent.
Although, the initial problems caused by Fannie Mae and Freddie Mac had helped mortgage rates, the pressure from inflation was too much for investors to ignore. Both the Producer Price Index (PPI) and the Consumer Price Index (CPI) posted big inflation numbers. PPI posted the highest inflation number since 1981 at 1.8%, and CPI reported inflation at 1.1 percent, up from .6%. These big numbers caused many pundits on Wall Street to increase their calls for the Fed to raise interest rates.
Besides inflation, it appears that the economy is not doing as poorly as thought. Even though Fannie Mae and Freddie Mac are a problem, other financial institutions outperformed expectations last week. Wells Fargo, Chase, and other posted better than expected performance in the 2nd quarter. Also, the Retail Sales report came in better than expected.
This week the volatility is expected to continue. Although there is little economic data to help allay inflation fears, the stock market could help push mortgage rates back down. If the stock market falters, it could ignite a flight to quality, which will no doubt benefit mortgage rates. Also, oil prices fell off a little last week, if this becomes a trend, then inflation fears might subside. If neither of these events happen, mortgage rates may continue to increase.
Rate Watch
Mortgage rates fall, as Fannie and Freddie’s future becomes gloomyLast week, the big question for Mortgage rates was the big question for the whole global economy. What’s going on with Fannie Mae and Freddie Mac? Rumors swirled regarding the health of these two mortgage market behemoths, and they appear to be on life support. Fannie and Freddie Mac collateralize and guarantee over $5 trillion in mortgage debt. The prospects of their failure left a lot of uncertainty in the market. If these two companies fail, mortgage financing would slow to a crawl. Together, these two entities represent 40% of the residential mortgage market.
Last night, the Federal Reserve and the Treasury Department released a plan to prop up the struggling
GSEs. First, the Treasury department will grant the two entities a temporary increase in their lines of credit with the US Treasury. Second, the plan will give the Treasury temporary authority to purchase stock in the two companies, if need. And lastly, the plan will allow the Federal Reserve to lend to the GSEs should they require it. As of the writing of this newsletter, the stock market has not reacted favorably to the plan.
Since the Fannie Mae and Freddie Mac fears came into focus, the stock market has taken a beating and new predictions of recession have entered economic outlooks. This has really helped to push mortgage rates lower. Bankrate.com’s
overnight average on the 30-year fixed rate mortgage has fallen to 6.09%, down from last Monday’s 6.26%. Other products have followed. The 15-year fixed rate mortgage fell to 5.63%, and the average on the 5-year Adjustable Rate mortgage dropped to 5.51%, down from last week’s 5.78%.
This week’s economic calendar is stock full of data and economic events. On Tuesday, Fed Chairman Ben Bernanke will begin a two day testimony to the Senate Banking Committee. The Fed Chairman can expect to be grilled on the problems with Fannie and Freddie and his words may have some impact on the markets. On Tuesday and Wednesday, two big inflation reports will be released, the
Producer Price Index (PPI) and the
Consumer Price Index (CPI). PPI measures wholesale inflation, while CPI concentrates on inflation in consumer goods. Inflation has been a big area of concern for a number of weeks.
It will also be important to watch Tuesday’s
Retail Sales report, Wednesday’s
Industrial Production report, and Thursday’s
Housing Starts report. All of these reports could have an impact on mortgage rates.
