Mortgage Rates : Ready To Respond To The Federal Reserve?

mortgage rate drops to 4.31

The U.S. mortgage market worsened last calendar week for the first time in three weeks. Mortgage-backed bonds dropped on stronger-than-expected economic data both domestically and abroad.  Strong corporate earnings played a role, too, as the Fannie Mae 3.5% coupon slipped, leading conventional mortgage rates higher.  Mortgage rates for the 30-year fixed rate mortgage climbed slightly, as did rates for  VA and FHA mortgages. 

It’s been a wild few weeks for the mortgage market. This week should be the same. The Federal Reserve meets for scheduled 2-day meeting Tuesday and Wednesday. Whenever the Fed meets, mortgage rates can get volatile.

30-Year Fixed Rate : 4.31% Nationwide

U.S. mortgage rates are in retreat. According to Freddie Mac’s weekly survey of 125 banks nationwide, mortgage rates peaked in mid-July and have since reduced by 0.20 percentage points.  The “going rate” for a conventional, 20% down payment purchase mortgage fell to 4.31% for buyers with good credit last week. Banks charge an accompanying 0.8 discount points for access to the rate, on average, where 1 discount point is a closing fee equal to 1 percent of your loan size.  It marked the second straight of falling rates from Freddie Mac — a streak unmatched in 12 weeks. However, rates were at their best in last week’s first half.  When the week was starting, bond markets were still rallying from Federal Reserve Chairman Ben Bernanke’s congressional testimony the week prior. Chairman Bernanke had made several strong remarks about Wall Street’s reaction to the possibility of a Fed “taper” — the gradual winding down the central bank’s of mortgage-market stimulus.  By Wednesday, though, attention turned to economic data including news from housing.  Both the Existing Home Sales and New Home Sales reports showed strength, as a Durable Goods report which combined to reverse the flow in bonds. By Thursday, rates had changed in anticipation of the next major market risk — the Federal Reserve’s next scheduled meeting.  By Friday, mortgage rates were off the week’s best and that’s where this week begins.

What Will Mortgage Rates Do This Week?

It’s a busy week for markets which means that mortgage rates will fluctuate. Likely by a lot. In addition to the typical economic calendar of events, there is a 2-day meeting of the Federal Open Market Committee scheduled to begin Tuesday.  Rates could go in either direction this week.  The Fed’s meeting is Key Event #1. The Friday release of July’s Non-Farm Payrolls report is #2. Depending on the Fed’s language in in its post-meeting statement, and the relative strength of the jobs report, today’s home buyers could see a huge improvement in overall rates, or a reversal of rates toward 5 percent.

The calendar for the week is as follows :

  • Monday : Pending Home Sales Index
  • Tuesday : Consumer Confidence
  • Wednesday : FOMC Adjourns; Advance GDP
  • Thursday : Initial Jobless Claims
  • Friday : Non-Farm Payrolls; Inflation Results

Note the heavy action on the back-side of the week. Mortgage rates may be tame up until Wednesday’s FOMC adjournment. Beyond 2:00 PM ET Wednesday, though, they’ll be jumpy.  It’s not a good idea to be unlocked going into to Wednesday afternoon. The Fed may help rates ease lower but, then again, maybe not.  You may not want to be on the wrong side of that bet.


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    Michelle Coolidge-Tondu is currently serving her mortgage clients as a Vice President, Sr. Loan Originator and Certified Underwriter with over 25 years in the mortgage industry. Her passion for her profession has resulted in her achieving the ranking of Top 100 Originator in the Nation, among numerous industry achievement awards and recognitions. One of the attributing factors to Michelle's success is her dedication to remaining your trusted source for mortgage and real estate information, as well as fast and accurate pre-approvals. As Michelle reads program guidelines, updates, various blogs, and other related information, she passes on the most important information to you through this site. This site is designed to help educate home buyers, home refinancers and real estate agents on the current happening of the mortgage and real estate industry.

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