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 .

Fed Leaves Rates Unchanged

With no surprise the Fed did not move to raise the Fed Funds & Discount Rates. They provided rhetoric that inflation remains a concern, there was on descending vote in favor of raising rates. This means we will most likely continue to see a rise in energy and food prices.

Initially mortgage-backed securities were trading lower, meaning higher remortgage rates; hover within forty-five minutes of the announcement rates have gained back their losses and should be unchanged. The volatility continues.

Paul Cantor, (804) 433-1510

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.

Weekly Mortgage Rate Commentary

In what should have been a quiet week for financial markets, turmoil reined. The Fed started the holiday-shortened week by slashing the Fed Funds rate to 3.5% from 4.25%. The official position was that the move was in response to the weakening economy, but there may have been another reason. A rogue trader in one of France's largest financial institutions orchestrated a $7 billion fraud. The Fed's move likely helped mitigate the damage from this fraud and the global impact of unwinding the trader's positions in various international markets. Mortgage rates experienced a whiplash effect, first dropping, and then bouncing back upward as the week ended.

In addition to dealing with the fallout from last week, this week has an extremely full calendar of economic data releases. New Home Sales on Monday will kick off the excitement, followed by Durable Goods Orders and Consumer Confidence on Tuesday. Wednesday previews employment numbers with the volatile ADP Employment Report, along with advanced fourth quarter GDP and inflation data. Also on Wednesday, the Fed will release their formal policy statement and decision on interest rates, likely to be yet another cut. And as if that weren't enough action, Thursday will bring the Fed's favored measure of inflation - the Core Personal Consumption Expenditures Index - followed by the official Jobs Report on Friday.

What will make the end of the week particularly interesting is the inflation and jobs data coming out following the Fed's scheduled move on Wednesday. Will controlled inflation and/or higher unemployment make them look like heroes, who made the right moves over the past two weeks? Or...could healthy job growth or high inflation, which is likely to be exacerbated by cuts to the Fed Funds Rate, make the Fed look like goats? It's sure to be turbulent - so strap in, hold on, and stay tuned - and feel free to call me for updates as the week progresses