The Dead Cat Bounce is a Wall Street term that refers to a brief recovery in the price of a declining stock, bond, security or market. The term is derived from the concept that “even a dead cat will bounce if it falls from a great height”. This phenomenon may apply to the mortgage bond market in the near future.

First of all, remember that when bond prices go up, rates go down. When bond prices fall, rates go up.

In the latter half of 2008, 30 year rates moved in a range from 5.875% to 6.5%. 15 year rates moved in a range from 5.75% to 6.125%. That is until November 25th, 2008. On that day the U.S. Federal Reserve Board announced that it would initiate a program to purchase mortgage backed securities from Fannie Mae and Freddie Mac, artificially propping up the prices of bonds and keeping interest rates low. The very next day rates on a 30 year fixed went down to 5.125% and ensuingly headed further south.

Over the last year and four months, the massive purchases (1.25 trillion dollars worth) of mortgage backed securities by the Federal Reserve have kept mortgage bond prices up and interest rates down. The 30 year rate has fluctuated between 4.5% and 5.25%, while the 15 year rate has moved in a range from 4.25% to 4.875%.

Now the bad news. The Federal Reserve has officially stopped buying mortgage backed securities as of March 31st, 2010. Mortgage rates have started to move up. While there may be some short term volatility, some experts expect rates to rise by 1% this year.

If you need to get out of an adjustable rate loan, or would benefit by refinancing, this may be your last chance to do so at a great rate.

And lets hope for the “Dead Cat Bounce” or bounces. Because this cat is officially DEAD!

Posted by Terry Brunner. Terry is a Senior Loan Officer with Horizon
Financial. Terry can be reached toll free @ (877) 627-9211 x150 or
email TBrunner@HorizonFinancial.org. Visit Horizon’s website at www.horizonfinancial.org

Rates were much improved on Monday and Tuesday, much worse on Wednesday and Thursday, and idle for most of Friday. 

Overall, mortgage rates improved slightly, but don’t expect the volatility to subside. 

There is a ton of economic data to be reported this week. Each could cause mortgage rates to rise or fall:

• Monday : New Home Sales
• Tuesday : Consumer Confidence
• Wednesday : The Fed’s Beige Book
• Thursday : Initial Jobless Claims
• Friday : Personal Consumption Expenditures

If the data points to a better outlook for the economy, expect mortgage rates to rise.  If data looks weak, rates should fall.

There’s another factor influencing rates this week, too, and that’s the U.S. Treasury’s plan to sell its most weekly debt in history.  With 4 separate auctions, the government is selling $115 billion in Treasury notes.  If the notes are in low demand, bond prices will fall, pushing up rates.

Indirectly, this should cause mortgage rates to rise.  If demand is very weak, mortgage rates should rise by a lot.

Very busy week ahead.  Expect mortgage rates to be on the move.  As always, if you find a rate and payment you’re comfortable with I’d recommend locking.  We do offer a free one time float down should rates improve during your loan process.

Posted by Scott Fowler.  Scott is a Partner / Sr. Loan Officer with Horizon Financial.  Scott can be reached toll free @ 877-627-9211 x 104 or email SFowler@HorizonFinancial.org.  Visit Scott’s website, www.ScottFowlerTeam.com.

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 .

Applications increased 4.3% overall, but the drop in demand for purchases loans is not a good thing for the overall housing market.      The drop in purchase applications was the result of rates jumping in late May which in turn caused many buyers to rethink their plans.   Coupled with higher unemployment potential buyers are wary of jumping into the market for fear they could lose their jobs even though home affordability is near all time highs.  

The spike in refinance applications is predictable because home owners looking to refinance can act quickly to take advantage of lower rates, while buyers tend to be less reactive to rate fluctuations.  

Overall rates are well below what they were last year.    30 year fixed rates, excluding fees, average 5.05% versus 6.22% last year.    Experts say mortgage rates need to be at 5% or below to significantly impact home loan demand.

Mike Owens is a Partner with Horizon Financial, Inc.    He can be reached at 864 907 2678 or via e-mail at mowens@horizonfinancial.org

Since falling to near 5% last week, 30 year fixed conforming mortgage rates have risen by almost .375%.

It’s a similar pattern we’ve seen over the last 10 months, rates drift down to near their “all-time lows”, and then surge higher over just a few days time.

Many people thought mortgage rates would break below 5%, but the market had other ideas.

Last month’s Producer Price Index exceeded expectations, too. 

A rising PPI is important to rate shoppers because if business costs are rising, consumer costs will eventually rise, too, as businesses share their expenses with American households.

This is inflationary, of course, and inflation is awful for mortgage rates.  It’s part of the reason why mortgage rates closed higher again Tuesday.

All year long, mortgage rates have been eratic and unpredictable.  Last week was no different and it’s why you shouldn’t necessarily try to time for a market bottom with mortgage rates. 

If an interest rate looks good to you today and the payment is manageable, consider locking it in.  In this market there’s no guarantees.

Posted by Scott Fowler.  Scott is a Partner, Sr. Loan Officer with Horizon Financial.  Scott can be reached toll free @ 877-627-9211 x 104 or email SFowler@HorizonFinancial.org . Visit Scott’s website @ www.ScottFowlerTeam.com .

If you qualify,  you can once again obtain a rate below 5% for a 30 year fixed rate. Rates for a 15 year fixed rate are in the low 4’s   If you have been waiting to try to obtain a sub 5% mortgage rate there may never be a better time.

There are no application fees or upfront costs to see if you will benefit from refinancing at this time.

Posted by Randy Ratchford. Randy is a partner and Sr. Loan Officer with Horizon Financial Inc. He can be reached toll free 877-627-9211 ext. 107 or e-mail RRatchford@HorizonFinancial.org

Combined, Thursday’s data will add more pressure to move mortgage rates lower.  

As the unemployment rate increases, households have less disposable income to pump back into the economy. 

Because consumer spending accounts for two-thirds of the economy, the growing ranks of the unemployed are forcing markets to change expectations about when the U.S. economy will reach its full recovery.

Inflation is the enemy of mortgage rates.  The perceived absense of inflation, therefore, can be its friend. 

With fewer working Americans, we can expect slower economic growth plus a smaller probability for inflation over the medium-term. This is why mortgage rates are lower of late, off by as much as a half-percent from the peak.

Posted by Scott Fowler.  Scott is a Partner and Sr Loan Officer with Horizon Financial, Inc.  He can be reached toll free @ 877-627-9211 x 104 or SFowler@HorizonFinancial.org .  You can visit his website @ www.ScottFowlerTeam.com  .