Category: Mortgage Rates

Mortgage markets faced a broad sell-off last week, sparked by the Federal Reserve and consumer sentiment.  This caused mortgage rates to spike from Wednesday to Friday and it caused the “lowest rates of all-time” to seem like an opportunity lost. It’s the first time in 4 weeks that mortgage rates rose overall. Last week was a strange week, to say the least.  Aside from the large docket of economic data, there was also: A Federal Reserve meeting 160 of the S&P 500 firms reporting earnings A global public health emergency It all combined to make for a volatile week in mortgages and the biggest losers were the people that hadn’t yet locked a mortgage rates.  Based on the current market, each quarter-percent that mortgage rates rose added $32 per month per $100,00 borrowed. This week, the market should be similarly jumpy.  Early in the week, there’s not much data to sway markets, nor is there much in the way of public policy.  […]

Monday, mortgage markets improved with news of new Swine Flu cases.  It’s a classic example of Safe Haven buying and today’s rate shoppers will see the benefits. Mortgage rates improved about 0.125 percent Monday. It’s not an official term, but “Safe Haven buying” describes the trading patterns in which large numbers of investors move money away from risky investments and toward safer ones.  As a general rule in Safe Haven buying, stocks sell off and bonds make gains, including mortgage-backed bonds. Fears that a global Swine Flu outbreak would slow the global recovery is a major reason why mortgage rates improved Monday. Dumping risk is a common reaction on Wall Street when unexpected events occur.  Because the future is uncertain, traders prefer to play it safe.  Hence the jargon-like term, “Safe Haven buying”. If nothing else, Monday’s mortgage rate action reminds us that the biggest influences on the market are often not the events we can prepare for.  It’s the events we never saw […]

The Federal Reserve meets next week for a policy-setting meeting. It’s one of 8 scheduled Fed meetings this year in which the Federal Open Market Committee votes on whether to raise, lower, or leave unchanged the Fed Funds Rate. Based on data compiled by the Federal Reserve Bank of Cleveland, Wall Street’s expectations of the Fed Funds Rate post-meeting are as follows: 97 percent probability that the Fed Funds Rate holds at 0.000 to 0.250% 3 percent probability that the Fed Funds Rate is raised to 0.750%. There is no expectation for a 0.500% Fed Funds Rate. The Fed Funds Rate influences the economy by changing borrowing costs for banks, businesses, and consumers.  When the Fed Funds Rate is lowered, “cheaper money” is meant to speed the economy forward.  When the Fed Funds Rate is raised, by contrast, costly borrowing tends to slow the economy down. Changes to the Fed Funds Rate do not directly correlate to changes in mortgage rates. Because Wall Street […]