Is it time to catch rates before they rise?

Mortgage Rates Rise from Lows

After dropping to fresh lows following last week’s Fed announcement, mortgage rates gave back some of their gains this week and ended a little higher. Reduced investor concerns about Europe added to the upward pressure on mortgage rates as well.

When financial markets experience large price changes in a short period of time, it’s common for a correction to take place. Last week’s Fed announcement produced a strong rally in mortgage rates and a large decline in the stock market. With little fresh news from the Fed this week, these markets reversed a portion of last week’s movement.

The news from Europe was mostly positive this week. European officials agreed to expand the bailout fund which is being set up to provide additional liquidity for debt issued by struggling nations. In addition, Germany passed an important vote showing support for the aid programs. At times, the healthier European nations have expressed reluctance to pay for the aid to weaker nations. Since Germany is the largest Eurozone member, its support is critical. As a result, investors perceived a lower risk of default, and they became more willing to invest in riskier assets. This helped the stock market and hurt mortgage rates.

Also Notable:
• The August Core PCE inflation index was 1.6% higher than one year ago
• Weekly Jobless Claims declined to the lowest level since April 1
• August Pending Home Sales declined 1% from July
• Demand was stronger than average for all three Treasury auctions

Average 30 yr fixed rate:
Last week: -0.20%
This week: +0.05%

Stocks (weekly):
Dow: 11,100 +350
NASDAQ: 2,450 -25

Week Ahead
The biggest economic report next week will be the important Employment data on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Before the employment data, ISM Manufacturing and Construction Spending will be released on Monday. Factory Orders will come out on Tuesday. ISM Services is scheduled for Wednesday. In addition, Fed Chief Bernanke will be speaking on Tuesday.

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Roger Odoardi

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.