Mortgage Rate Commentary, Week of June 1, 2008

While the economy is not looking all that much better, last week's economic news was enough to nudge mortgage rates upward. GDP came in as anticipated at 0.9%. While this number is well below what most economists would call "healthy," it was enough to cause many traders to begin unwinding recession-leaning positions. With another quarter's GDP above zero, the probability of recession becomes even less likely. While this is good economic news, the downside is that any acceleration in the economy is likely to lead to increased inflationary pressure and mortgage rates may creep upward. However, we are not out of the woods yet, and no clear economic direction is set.

This week has two very important economic reports. The week starts with the ISM Manufacturing Index. If this index ticks unexpectedly above 50.0, rates are sure to begin climbing. The week ends with monthly employment data. If the unemployment rate goes up to 5.1% or higher, and more than 45K jobs are lost, we could see mortgage rates flatten, or even slip, slightly as next week begins.