Weekly Mortgage Rate Review--The Climb Begins, September 10, 2010

Mortgage Rates Climb for First Week in 3 months

Mortgage rates rose this week as we forcasted in this space last Friday.  Macro-economic conditions and technical market factors combined to produce a negative environment for mortgage pricing.  For the first time in 12 weeks rates rose for the week.  Some lenders moved more than others, yet increased costs at available rates was an across the board phenomenon.  Unfortunately for borrowers, conditions do not appear for next week.  While we do have additional economic data that could produce better pricing, long term trends in the stock market, coupled with very poor yields in the debt markets seem to argue for higher mortgage pricing.  These trends could be long-lasting. 

Let's review this weeks rate activity:

Week in Review

Monday markets were closed for the Labor Day Holiday.  Tuesday had me regretting my prediction that we had seen the end of new all-time low rates as the stock market sold off and mortgage-backed securities (MBS) rallied.  However with very little data or news supporting the move, it wasn't destined to hold.

Wednesday produced the results that I had been expecting.  Economic data from the Federal Reserve's Beige Book showed decelerating growth throughout the US...and still mortgage pricing worsened.  This represented a break from convention, as the stock market rallied with less than positive economic data.  This type of move can mean that the market believes that dramatic changes are coming. 

Thursday confirmed the new trend as the MBS market sold off.  For the second day in a row, a US Treasury auction did not produce the results expected.  Investors have seemingly reached the point where the low returns available from Treasury Bonds  are simply not producing sufficient results.  Friday, was once again quiet on the data front, yet the trend higher continued.  For the week rates were higher, with three straight days of increase.

Next Week

More data will be available next week to guide markets, but not unitl Tuesday.  On Tuesday we will see the Retail Sales Report followed by Industrial Production figures on Wednesday and Inflation Reports on Thursday.  This represents a comprehensive view of the economy.  However, unless dramtic surprises showing economic deterioration are seen, I do not expect the general trend of higher rates to stall.  Next week will not likely produce any major moves in mortgage pricing---those are likely, but later in the Fall.