Mortgage markets improved last week, but by a slight amount only; not enough to move conventional mortgage rates in South Carolina in any significant manner.

Wall Street watched as Eurozone leaders expressed little willingness to increase aid programs within the region, and as the Federal Reserve voted against new economic stimulus for the United States. The Fed Funds Rate remains near 0.000 percent and QE3 was not introduced.

Investors had expected the opposite outcome in both scenarios.

In most weeks, these stories would have led mortgage rates lower. There was, however, a fair amount of data suggesting that the U.S. economy is in recovery, and that tempered any major shifts in markets.

• Manufacturing data proved to be strong
• Inflation numbers are heating up
• Jobless claims continue to drop, week-to-week

In addition, in its last meeting of the year, the Federal Reserve specifically mentioned that the economy has been “expanding moderately”.

These are all good signs for the future of the U.S. economy. Unfortunately, for mortgage rate shoppers and would-be home buyers, it may mean higher mortgage rates ahead.

Since early-November, mortgage rates have idled, moving within a range of less than 2 basis points and centered on 3.99%. According to Freddie Mac, this week’s average 30-year fixed rate mortgage fell to 3.94% which, at first glance, appears to be a “dip”.

To get access to that rate, however, requires more discount points as compared to prior weeks.

This week’s 3.94% with its accompanying 0.8 discount points is the financial equivalent of last week’s 3.99% with its accompanying 0.7 discount points. Going further, last week’s rates are actually less expensive to mortgage applicants for the first 3 years of a loan because the closing costs are so much lower.

So, given global economic conditions and the mortgage bond market’s status as a “safe market”, the failure of mortgage rates to fall suggests that this may be as low as mortgage rates get. It’s time to look at locking in.

This week is a holiday-shortened week. Markets will close early-Friday and volume is expected to be thin. Therefore, expect exaggerated movements in rates. There are 3 releases related to housing (Housing Starts, Existing Home Sales, New Home Sales) and a consumer sentiment release. 

Rates were also held low by ongoing issues in Greece.

In Greece, the government is currently struggling to meet its debt obligations — despite a restructuring of existing debt negotiated in 2010.

Without a plan for its new debt, though, Greece will likely to default on what it owes.  Eurozone and international banking leaders have failed to reach consensus on the situation, and now the citizens of Greece are in a state of social unrest.

The uncertainly surrounding the nation-state spurred a bond market flight-to-quality last week. That, too, helped to keep rates low. 

Last week, mortgage rates fell for the sixth week out of nine, a streak that’s dropped conforming mortgage rates in Simpsonville to their lowest levels of the year.

This week, that could change.

Wednesday, the Federal Open Market Committee adjourns from a 2-day meeting and anytime the Fed meets, there’s a good chance that mortgage rates will move. The FOMC makes the nation’s monetary policy.

The meeting adjourns at 12:30 PM ET and Fed Chairman Ben Bernanke will follow with a press conference at 2:15 PM ET. The press conference is meant to give context to the FOMC’s decision, and allow for back-and-forth with the press corps. Wall Street will watch closely, too, for signals of the Fed’s next action(s).

In addition, this week will see the results of May’s Existing Home Sales report and New Home Sales report. Both are considered important to the housing market, and to the economy overall.

If you’re still floating a mortgage rate, falling mortgage rates have helped you. There’s not much room for rates to fall further, however. Consider calling your loan officer and locking something in.

It’s an abrupt change in mortgage rate momentum.

Since the Federal Reserve’s March 2011 meeting, in which the Fed said rising energy costs are “putting upward pressure on inflation“, inflation chatter has figured big for Greenville  mortgage rates. With each tick higher in gas prices; in every conversation on U.S. debt load; as fruits and vegetables get more expensive at the supermarket, Wall Street’s fears of inflation have grown, and rate shoppers have suffered.

The connection between inflation and mortgage rates is straight-forward. Inflation is the devaluation of the U.S. dollar — the currency in which mortgage bonds are denominated. As the dollar loses values, so do mortgage bonds, therefore, leading mortgage rates to rise, inevitably.

Leading up to last week, concerns peaked and rates did, too. And then, a strange thing happened. The government’s March inflation report showed inflation well under control.

The results surprised Wall Street and the trades that had previously served to pump rate up, last week, ran in reverse.

The biggest gains were made Friday.

This week, inflation takes back-seat to housing data. There’s a lot of it coming.

• Monday : Homebuilder Confidence Index
• Tuesday : Housing Starts and Building Permits
• Wednesday : Existing Home Sales
• Thursday : Housing Market Index

There’s no data due Friday with markets closed for Good Friday.

This is a holiday-shortened week so expect low trading volume to render rates more erratic than typical. If you’re not yet locked in to a mortgage rate with your lender, consider doing it this week.

Mortgage rates worsened last week as energy costs remained high and jobs data looked strong. The safe haven buying that characterized the March mortgage market has eased.

It’s driving mortgage rates higher across South Carolina.

Conforming and FHA mortgage rates rolled back 8 weeks worth of improvements last week and are now back to mid-February levels. The rise in rates is hurting refinance activity and home affordability.

The biggest story from last week figures to carry forward into this one — the Federal Reserve’s take on inflation.

In the minutes from its March meeting, the FOMC was shown to have discussed the possibility of raising the Fed Funds Rate ahead of schedule, and to be watching near-inflation closely. Both developments are in response to a growing economy with rising price pressures.

Mortgage rate shoppers should take note.

Inflation is a mortgage-rate killer. When inflation is present in the economy, all things equal, mortgage rates rise. Sometimes by a lot. And, usually, just the expectation of inflation is all it takes to make mortgage rates jump.

That’s what we saw last week.

This week, keep a close watch on new inflation-related data set for release. This includes Tuesday’s Retail Sales data, Wednesday’s Producer Price Index, and Thursday’s Consumer Price Index. Each release can potentially move mortgage rates although, if recent trends are an indication, expect for rates to rise.

Mortgage rates in Simpsonville remain historically low. If you’re shopping for a mortgage, consider locking as soon as you can.

Mortgage rates improved again last week despite an inflation-acknowledging statement from the FOMC and stronger-than-expected jobless data.

Usually, events like this would lead mortgage rates higher, but violence in the Middle East and worsening fear for public safety in Japan took center stage instead, spurring a massive, global flight-to-quality instead.

Rate shoppers in Simpsonville, SC  benefited.

As safe haven buying increased last week, conforming mortgage rates dropped, falling to their lowest levels since January. It marked the 5th straight week through which mortgage rates improved and is the longest such streak since August 2010.

This week, rates may run lower again. You may not want to gamble on it, though. Here’s why.

In general, when there’s inflation in the U.S. economy, mortgage rates rise. This is because inflation devalues mortgage bonds, the underlying security on which mortgage rates are based.

So, last Tuesday, the Federal Open Market Committee met and in its post-meeting press release, the group said inflation pressures were building, a signal that rates should rise. It then went one step further.

To keep the economy from slipping back into recession or into disinflation, the FOMC also said it plans to keep its existing monetary policies in place for the foreseeable future.  This, too, is considered inflationary — another signal that rates should rise. And they did. 

Immediately following the FOMC announcement, mortgage rates spiked. But it didn’t last.

Starting Wednesday, the battles in Libya grew more intense, and Japan battled with its own domestic crisis (i.e. a potential nuclear meltdown). The economic implications of the events spurred the purchase of “safe” assets, and mortgage bonds improved.

And this is why mortgage rates won’t stay low for long.

Eventually, Wall Street will come to terms with Libya and Japan and the flight-to-quality will reverse. Inflation, however, is not likely to lessen. At least, not anytime soon.  Therefore, this week may represent the low-point in mortgage rates for a while. It’s important to lock your low rate while you still can.

There isn’t much economic data due this week so mortgage rates will take their cues from the broader market. If you haven’t locked a rate yet, or were waiting for rates to fall, this might be your best chance. Call your loan officer as soon as possible and get a fresh rate quote today.

Better-than-expected retail sales and positive job growth buoyed stock markets and sank bonds.

Mortgage rates in South Carolina rose for the 4th time in 5 weeks last week, extending a losing streak which dates back 4 months.

Today, fixed, conforming rates are three-quarters of a percent higher as compared to the market’s low point, November 3, 2010. For a $200,000 home loan, that size rate hike equates to an increase in a monthly mortgage payment of $89 per month.

Mortgage rates are at their highest levels of the year and, this week, they may continue ticking higher.

There isn’t much data set for release this week so markets will take their cues from two major events — one economic and one political.

The major economic event is Fed Chairman Ben Bernanke’s testimony to the House Budget Committee late-Wednesday. Chairman Bernanke is expected to speak about employment, but will likely touch on other topics of import including economic growth, the U.S. dollar, and the nation’s debt ceiling.

The Fed Chairman’s comments will move mortgage rates in one direction or the other, so locking in advance of his testimony may be prudent. Mortgage rates have more room to rise than to fall, after all.

The second major event is Egypt’s ongoing political strife. By Thursday of last week, Wall Street had shrugged off the region’s crisis and unwound the safe-haven trades that had helped mortgage rates during the week prior.

If instability returns, mortgage rates, once again, will be pressured lower.

Regardless of your rate-locking plan for this week, it’s important to recognize that, although rates have risen, they’re still well below historical average. Therefore, rates may have a lot of room to move higher, still.

If you’re shopping for a mortgage, or are now under contract, consider locking your rate as soon as possible.

Rates from Monday to Friday of this week have remained essentially unchanged.  According to MBSQuoteline:

Stock Rally Offsets Positive Inflation News

Early in the week, a forecast from the Fed that inflation should remain low for the next couple of years moved mortgage rates lower.

The economic news later in the week was less favorable for mortgage rates, however. Strong earnings reports produced a rally in the stock market, which pushed mortgage rates higher. In the end, mortgage rates finished the week essentially unchanged.

In testimony before Congress on Tuesday, Fed Chairman Bernanke provided an update on the Fed’s outlook for economic conditions.

Of note, Bernanke predicted that inflation will not be a concern any time soon, which was good news for mortgage rates. While he expects economic growth to turn positive later this year, he suggested that the labor market may be weak for several years. As a result, the fed funds rate will likely remain near zero for “an extended period”.

The June Existing Home Sales report contained positive news for the housing market. In June, Existing Home Sales rose for the third straight month, climbing 4%.

 The inventory of unsold existing homes fell to a 9.4-month supply from a 9.8-month supply in May.  According to the National Association of Realtors (NAR), home sales were helped by the first-time homebuyer tax credit and “historically high affordability conditions”.

Posted by Terry Brunner.  Terry is a Sr. Loan Officer with Horizon Financial.  Terry can be reached toll free @ 877-627-9211 x 150 or email TBrunner@HorizonFinancial.org .

Stronger economic growth was good news for the stock market, and the Dow rose over 500 points. It was unfavorable for the bond market, however, and mortgage rates ended the week moderately higher.

On Wednesday, the Fed released its minutes from the June 24 FOMC meeting, and most of the news was negative for mortgage rates. The minutes revealed an upward revision to the Fed’s forecast for economic growth and inflation in 2009 and 2010.

In addition, Fed officials expressed a strong reluctance to increase any further the program to purchase mortgage-backed securities (MBS). Mortgage rates are largely determined by MBS prices. When the Fed initially announced its MBS purchase program in November, mortgage rates immediately dropped, and they dropped again significantly when the Fed announced an increase in the program in March.

The Fed has a substantial involvement in MBS markets, and any change in this program would have a major impact on mortgage rates.

Inflation Data:

• June Core CPI inflation rose at a low 1.7% annual rate
• After falling below $60 per barrel, oil prices rose back to $63 per barrel
• The Fed purchased $22 billion in agency MBS during the week ending 7/15

Look for continued volatility in mortgage rates for the short term.

Terry Brunner is a Senior Loan Officer with Horizon Financial, Inc.  He can be reached toll free @ (877) 627-9211 x150 or TBrunner@HorizonFinancial.org .