Mortgage Rates Seek Direction as Refinance Activity Soars, July 7, 2010

By:: David Coster - MortgageLoan.com

Mortgage Rate Trend Direction: Neutral

Economic Reports/Rate Impact: No data released today

Key News: European Bank Stress Tests

Summary

Yesterday we witnessed a stunning turnaround, to the downside (from earlier highs), in the US stock market which resulted in a late day surge in mortgage-backed securities and lower mortgage pricing from lenders. Today begins without a clear direction and no economic data to provide one. Consequently economic news and market activity may move rates during the day. Asian and European markets are lower today. Mortgage rates are expected to begin the day near their close yesterday.

Impact of economic data released today

No official economic data is scheduled for release today. The Mortgage Banker’s Association did release the results of their weekly survey of lenders which showed a significant jump in refinance applications. The jump is attributed to the historically low mortgage interest rates being offered by lenders.

Impact of international or political events

European bank regulators will release their methodology for evaluating the strength of close to 100 European banks. Many analysts believe that banks in Europe may be at risk due to the debt crisis that is plaguing most European nations but Greece, Spain, and Portugal in particular. As many European banks own bonds (government debt) issued by these nations, the banks’ strength may be compromised by reductions in the value of these bonds. Analysts will be looking to see if the criteria used to evaluate the banks, takes into account the potential default of one or more nations on their debt. Bank failures in Europe could create a tightening of credit around the world and further weaken the global economy.

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