Mortgage Rate Market Review, September 28, 2008

Last week's failure to complete any bailout sent mortgage rates climbing upward despite other economic news that revealed continuing weakening. Second quarter GDP was revised downward to 2.8% with expectations for third quarter GDP to fall near or below 1.0%.

Mortgage rates may be in for another very volatile week. Expectations are running very, very high for Washington to complete some type of bailout package. Any more surprise delays could catapult rates higher again this week. While most of the economic data due this week is expected to continue to show a struggling economy, which would usually bring lower rates, we could see rates move either way. If stock markets surge on completion of a plan, the inflows of money into the stock markets and out of bonds, could drive rates higher. Of course, the data due this week will also influence mortgage rates. If we see another unexpected jump in the unemployment rate or significantly higher job losses than expected, rates could experience some strong downward pressure as the week ends.

For a complete check-up on your home mortgae financing contact Paul Cantor, CMPS at TrustMor Mortgage, (804) 433-1510 or www.paulcantor.com .

Fannie & Freddie Controlled by the Government

GOOD NEWS FOR THE HOUSING MARKET! Fannie Mae & Freddie Mac issued bonds are soaring, resulting from Sunday's announcement that the government will at least temporarily take control of the both GSEs.

Mortgage yields now have every reason to come down, which means lower interest rates on mortgages. The spread between mortgage and Treasury yields has been a thorn in the mortgage industry’s side. The spread has spent the past few weeks again at historic highs, exceeding 2.75%, because of credit and volatility fears.

With yesterday’s action in place investors can buy higher yielding bonds with the same security as a treasury bond. This has and most likely will continue to translate into lower mortgage rates.