Mortgage backed securities experienced one of the most volatile rides ever seen last week, once all was said and done rates on fixed rate mortgages were up about 0.375%. Economic news continued to be mostly sour last week with the Labor Department's Employment Report highlighting the current economic challenges. While the unemployment rate did tick downward to 4.8%, the drop was due mostly to qualified job seekers giving up on finding a job. The economy also shed another 63,000 jobs last month, and the ISM Manufacturing Index slid below 50, indicating that manufacturing may be contracting. Generally, this much negative economic news would drive mortgage rates downward. However, because investors have been less interested in mortgage-backed instruments, mortgage rates have been held higher. Additionally, many institutions have been selling parts of their portfolios of mortgages, often at a discount. This additional supply of cheap mortgage investment products in the marketplace has kept rates from dropping even further.
The instability in the market is likely to continue this week as several indicators of the economies health will be release, including: Retail Sales, Initial Jobless Claims, Consumer Sentiment and the inflation-measuring Consumer Price Index. Advice to borrowers is to lock to protect them from the volatile market swings.
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