Mortgage markets improved again last week. The combination of global economic uncertainty plus a dour outlook from the Federal Reserve pushed mortgage bonds to highs for 2011, and drove mortgage rates below their all-time lows.
Bonds were volatile, driven by the stock market’s gyrations.
On 4 consecutive days, the Dow Jones Industrial Average moved by more than 400 points. Rate shoppers in South Carolina had no choice but to go along for the ride.
The week began with the market’s reaction to Standard & Poor’s U.S. credit rating downgrade. Mortgage bonds caught a boost on the news, and pushing rates lower throughout the day.
Tuesday, rates idled ahead of the Federal Open Market Committee meeting. There was speculation that the Federal Reserve would introduce a new round of economic stimulus but that didn’t happen. Instead, the Fed pledged to keep the Fed Funds Rate in its current range near zero percent until mid-2013, at least.
Mortgage rates dropped on the announcement and continued to drop until they fell to their lowest levels of the year — and of all-time — late Wednesday afternoon.
This proved to be the lowest rates of the week.
Thursday and Friday were marked by better-than-expected jobless figures and an improving Retail Sales number. Mortgage rates rose slightly.
This week, mortgage rates should be equally as volatile.
In addition to new bailout talks within the Eurozone, there is a bevy of economic data due for release in the U.S., as well as a full Fed speaker docket:
- Monday : Homebuilder Confidence Survey; Fed President Lockhart speaks
- Tuesday : Housing Starts; Building Permits
- Wednesday : Producer Price Index; Fed President Fisher speaks
- Thursday : Existing Home Sales; Fed President Dudley speaks
- Friday : Fed President Pianalto speaks
Mortgage rates have been trending lower in recent weeks and there are few reasons to think that trend will reverse. However, mortgage markets can be wildly unpredictable — especially when acted upon by an outside force such as the Federal Reserve or the U.S. government.
Stimulus and rheotoric can change mortgage rates in a hurry.
Therefore, if you see today’s rates and they fit within your budget, consider locking something in. Once rates start to rise, they’re going to rise quickly.
Mortgage markets were especially volatile last week, taking rate shoppers in South Carolina on a roller-coaster ride. The week’s news schedule was full. It included debt ceiling debates, jobs figures, and ongoing maneuverings within the Eurozone.
Each story a material impact on mortgage rates and, as a result, rates varied wildly from day-to-day.
Throughout the early part of the week, mortgage rates fell.
Monday, bond markets improved as leaks of the congressional debt ceiling agreement surfaced. Investors approved of the accord’s general terms and bought U.S.-backed debt to prove it. Tuesday, when the final agreement was reached and the terms were made public, mortgage rates dropped again.
This is because the debt ceiling agreement is based on spending cuts and tax increases. In response, analysts revised lower their respective growth estimates for the United States, benefitting bonds.
By Thursday, markets were in full rally mode.
On the eve of the July jobs report, traders flocked to the ultra-safe bond market; “whispers” put the net jobs created figure at a negative. Wall Street feared the worst. By Thursday’s close, mortgage pricing was at its best levels since November 2010.
Friday morning, though, markets recoiled. When the Non-Farm Payrolls report showed much-better-than-expected growth, it triggered a bond market sell-off and rates reversed higher. Rates rose more Friday than on any single day since November 30, 2010.
If you were quoted a mortgage rate on Thursday, on Friday, the same mortgage rate cost 1 discount point more.
This week, rates may rise or fall — it’s too soon to tell.
Friday afternoon, after markets closed, S&P downgraded the long-term debt of the U.S. government a notch. Typically, lower credit ratings means higher borrowing costs which leads to higher mortgage rates, among other things. However, it’s unclear how markets will react to the S&P decision.
Plus, the Federal Open Market Committee meets Tuesday and that, too, can affect markets.
As always, the prudent move is to lock your mortgage rate if its payment and terms are sensible. There’s too much volatility to know what markets might do tomorrow.
Mortgage markets improved last week as the U.S. debt ceiling debate continued on Capitol Hill. Bonds traded in a range Monday through Thursday before breaking higher Friday morning.
30-year fixed conforming mortgage rates improved in South Carolina last week, falling to levels just north the product’s all-time low set in November 2010.
5-year ARMs improved last week, too. The benchmark adjustable-rate mortgage’s average national rate is now tied with its all-time low, also set last November.
This week, the direction of mortgage rates depends on two events:
- The resolution of the U.S. debt ceiling debate, due Tuesday
- The July Non-Farm Payrolls report, due Friday
Mortgage rates will be volatile as markets grapple with the expectations for the above events, and their eventual outcomes.
Sunday evening, for example, congressional leaders reached an agreement to raise the U.S. debt ceiling by $2.1 trillion, and to introduce $2.5 trillion in budget cuts within 10 years. The deal must pass Congress, however, and until it does, speculation will push mortgage rates around.
Friday’s jobs report should swing mortgage rates, too.
After starting the year strong, the 2011 jobs market has faded. Net new jobs have dropped 5 months in the row and the national Unemployment Rate is climbing. Weak job growth portends weak consumer spending and a weak economy — typically two outcomes that are good for mortgage rates.
Because of doubt cast by the debt ceiling debate, though, it’s too soon to know how Wall Street will react to the jobs data — strong or weak.
For now, mortgage rates remain low. They may fall further, or they may not. The “safe bet” is to lock.
Mortgage markets worsened last week as concerns for the global economy drove new rounds of “safe haven” buying. Fear continues to dominate mortgage bond market movement and South Carolina rate shoppers are benefiting.
Conforming and FHA mortgage rates fell for the second straight week last week, and closed out Friday with favorable momentum to the downside.
There were three main mortgage market drivers last week.
The first is tied to the Eurozone.
Although the Greek Parliament reached agreement on austerity measures for the nation-state two weeks ago, concerns that a debt crisis could spill into Italy, Portugal, Ireland, and/or Spain resurfaced last week. The debt of both Ireland and Portugal was downgraded to Junk status, and Italy and Spain may follow soon.
U.S. bond markets gained on the news.
The second story was the just-released Fed Minutes. Notes from the FOMC meeting showed that Ben Bernanke & Co. debated a slowing U.S. economy, the weakening domestic jobs market, and whether a third round of economic stimulus would be necessary. This, too, dragged mortgage rates lower.
The third story is one that’s still forming — the U.S. Debt Ceiling Debate. For now, the issue remains on the market periphery, but as the August 2 debt limit deadline nears, expect more influence over day-to-day mortgage rates.
Other factors in mortgage rates this week include the Existing Home Sales report; Housing Starts data; Homebuilder Confidence Survey; and, Jobless Claims.
Mortgage rates are low but remain volatile. If you’re wondering whether now is a good time to lock your rate, consider that it’s better to be safe than sorry. If mortgage rates rise this week, the rise may be permanent.
Rates can only stay low for so long.