Monday Market Commentary, Sept 28th, 2009: Where are Mortgage Rates Headed

by Alex Stenback on September 28, 2009

Monday Market Commentary is a weekly post on the week ahead in the mortgage market.  I’ve published this here since 2004 with one thought in mind:

Deciding when to lock your rate is not about knowing where rates are going, but about understanding the market, what has the potential to move rates and avoiding dumb risks.
Last Week: 
Mortgages last week were slightly improved, with 30 year fixed rates hovering at or around 5%, depending on the individual borrower and property level details.The big news, of course, was the Fed announcement that they will extend the deadline, but gradually phase-out the campaign to lower rates by carpet bombing the mortgage markets with billions of dollars.  I covered this in detail in a separate post Friday, but this means that rates will likely start their climb back toward 6% (or higher) in the coming months.In the short term, a weak economic outlook, saber-rattling in Iran, and the fact that the Fed will be purchasing mortgage backed bonds well into 2010 was enough to allow some minor improvement (.125%) to rates by the close on Friday.

This Week:
Now that the real estate market is giving bottoming signals, focus is shifting back to traditional/fundamental drivers of interest rates. In other words, we may start to see the return of Jobs and Inflation as a major force in moving interest rates.

This means that Friday’s employment report will be closely watched, as will the PCE (personal consumption expenditures) component of the Personal Income and Outlays Report, which prints on Thursday at 8.30AM.  An improving employment picture or evidence of inflation will often push mortgage rates higher.

Beyond that, we also have the Chicago Purchasing Managers Index (which measures business conditions around Chicago as a proxy for national activity) and the ADP payroll report to contend with.  Chicago PMI is expected to be slightly improved, which could hurt rates.  The ADP is a notoriously unreliable “sneak preview” of the official employment report, but can move markets if it is a surprisingly strong (or weak) report, so bears watching.

All in all a full week -  don’t forget to grab our Twitter feed for ongoing analysis as these reports hit the street.  There’s no better way to stay on top of mortgage rates.

This Week’s Economic Calendar [Barron's]

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