Monday Market Commentary February 22nd 2010: Where Mortgage Rates Are Headed

by Alex Stenback on February 22, 2010

Last Week:
30 year mortgages swung higher by roughly .25% in rate last week with most lenders – the increase was caused primarily by a fresh round of “my god inflation is going to destroy us all” worries sparked by some tough talk from the Fed (via the minutes rom last FOMC conclave) and one-off speeches by Fed honchos Plosser (Philly) and Hoenig (KC).

Much was made of a surprise (though irrelevant to mortgage rates) hike in the discount rate, and a warmer than expected reading on producer prices.

Mix the ingredients above with a stock market trying to front-run an economic recovery that may or may not soon materialize, and you get a spike in rates.  Only time will tell whether this is a head fake, or the beginning of the end of an ultra-low rate mortgage market putting rates on an upward slope for good.

This Week:
We are getting wide angle view of the economy this week with scheduled reports on several key sectors.  While you review the week, recall standing order number 1:  Good economic news tends to hurt mortgage rates, while poor economic news helps, and inflation is always a bad thing in mortgage land.

From the calendar:

Housing Market: Fresh snaphsots of the housing market will be delivered on Wednesday the 24th and Friday the 26th this week as new home sales and existing home sales for January report – if either of these reports spark a stock rally, look for rates to be hurt.

Economy: [Gross Domestic Product, 4th Quarter] Friday, Feb 26th 8.30AM  It is expected that the economy grew at a 5.3% clip in the fourth quarter – a significant surprise in either direction could move mortgage rates.  Within this report, a critter called the GDP deflator lives – it is a key measure of inflation, and with markets in a hyper-aware state over inflation, information beyond the headline on the GDP report may well have a big impact on rates.

Consumer: Confidence reports on Tuesday Feb 23rd, Consumer Sentiment, Friday Feb 26th.  Both of these numbers are correlate well with consumer spending, so are seen as leading indicators for increased spending/consumption.  This is another good for the economy but bad for mortgage rates report if it shows the consumer sector is heating up.

This Week’s Full Economic Calendar [Barron's]
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Watching rates? Follow me on Twitter for near-live coverage of mortgage rate related news and other (less eye-glazing) stuff.

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