Weekly Mortgage Rate Commentary

Last week economic news was mixed, with the ISM Services Index plummeting to its lowest point in its ten-year history. However, Factory Orders ticked up nicely and weekly jobless claims dropped. While we did not get any convincing evidence one way or the other about the economy, the major economic stimulus package has passed both houses of Congress and will be signed by the President. While there is debate on how effective the package will be, the elements regarding conforming mortgages will be very interesting to watch.

The item that seemed to have the biggest impact on mortgage rates last week was from Dallas Fed President Richard "Loose Lips" Fisher's off the topic comment made during a speech in Mexico City: "Monetary policy acts with a lag. I liken it to a good single malt whiskey or perhaps truly great tequila: It takes time before you feel its full effect. The Fed has to be very careful now to add just the right amount of stimulus to the punchbowl without mixing in the potential to juice up inflation once the effect of the new punch kicks in. ...My dissenting vote last week was simply a difference of opinion about how far and how fast we might re-spike the monetary punchbowl. Given that I had yet to see mitigation in inflation and inflationary expectations from their current high levels...I simply did not feel it was the proper time to support additional monetary accommodation.". This comment caused havic in the bond market resulting in home mortgage rates to increase by about 0.125%.

Next week heats up a bit with three very significant items. Retail sales data will give provide a glimpse at how consumers started off spending in 2008, and Industrial Production will provide some manufacturing insight. An unexpected spike in either could push rates up a bit. The most important event of the week is likely to be Fed Chair Bernanke's semi-annual testimony before the Senate. If he hints that inflation is under control, meaning more cuts are likely, rates will trend downward.

Paul Cantor is a Mortgage planned and a pricipal of TrustMor Mortgage Company in Richmond Virginia. He may be contacted at 804-433-1510 or on the web at www.PaulCantor.com.