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Because of the bonds-and-stocks similarities, we should expect for bond markets to behave like stock markets sometimes, too. This week will be one of those times. Mortgage bond markets are ripe for profit-taking and that will be bad for mortgage rates.
On the first Friday of every month, at 8:30 AM ET, the U.S. government releases the Non-Farm Payrolls report, except most people don't call it that. They call it "the jobs report". Tomorrow is the first Friday of the month. The jobs report has always been influential with respect to mortgage rates but, lately, it's of larger import. This is because Wall Street believes that jobs growth is the way forward for the economy. No jobs, no growth.
When the economy hit the skids in September 2008, the government made a massive intervention. In addition to formal stimulus from Congress, the Federal Reserve did what it could to loosen up the credit markets. One of the Fed's most well-known programs was its commitment to buy $1.25 trillion in mortgage-backed bonds in the open market. Internal studies from the Fed say the program lowered rates by 1 percent last year. The program ends March 31, 2010.
If you want to know where mortgage rates are headed in the future, you may be better off ignoring the experts. I conducted a 50-week study of the popular Bankrate.com Mortgage Rate Trend Index and it showed that the "expert consensus" on mortgage rates is wrong 3 times more often than it's right. That's not good.
Need a mortgage rate prediction? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may point you in the right direction. The Bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages or jumbo mortgages. Nor is the survey specific to Cincinnati or Chicago. Here's what to expect:
With consumer confidence on the mend, net job gains nearing zero, and Retail Sales rebounding, Wall Street had bid up mortgage rates this month. Mostly, the trading was just jockeying for position ahead of the December 15-16 FOMC meeting. Investors were worried that the Fed would blink; that it would change its economic outlook for 2010 and have to start raising the Fed Funds Rate sooner than forecast; that inflation fears would return. Instead, none of that happened.
A year ago Thanksgiving, mortgage rates reached an all-time low. We're approaching those same all-time levels again. But unlike last year, rates should stay low for longer than an hour or two. Mortgage rates will be suppressed until such time as consumer spending returns.
In currency markets, the U.S. dollar has been getting slaughtered. It's at a 2-month low against the Euro and is similarly weak against Asian currencies. But demand for dollar-denominated bonds is offsetting the expected rise in mortgage rates.
Are mortgage rates going up? Are mortgage rates going down? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may point you in the right direction.
If we study the long-term mortgage rate pattern dating back to late-2008, we observe that mortgage rates have bounced within in a tight range for nearly 8 months, only breaking the upper and lower boundaries for brief moments in time. Conforming mortgage rates appear to be "stuck" near 5.250 percent with 0 points.
Americans no longer have Recession on the Brain like they did last September and October. Back then, the financial crisis was the leading story of every news-related show on TV and in print. The notable absence of these The End Of The World As We Know It-like messages may be one reason why consumer purse strings are starting to loosen. For the fourth straight month in May, Retail Sales figures were hotter-than-expected. Consumer spending accounts for the majority of the economy's activity and, now that spending is up, Wall Street is betting that businesses will prosper.
It's a common belief among Americans that the Federal Reserve controls mortgage rates. This is incorrect. If that were true, however, mortgage rates would have increased between 2004 and 2006 while the Fed was jacking the Fed Funds Rate from 1 percent to up over 5 percent.
Are mortgage rates going up? Are mortgage rates going down? Not so long ago, Wall Street-traded securities move on fundamentals -- the strength of the economy, the health of corporations, data like GDP and so on. It was a safe dance because traders almost always found somebody to take a counter-bet. Markets ebbed and flowed in an easy-going way with long-term trends taking months to develop. Lately, though, Wall Street's been binary in its trading pattern, it seems. Put the risk on the table with a move to equities, take the risk off the table with a move to bonds
I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey is now available. The Bankrate.com survey is for conforming mortgages. It does not apply to FHA mortgages, VA mortgages, jumbo mortgages, or foreign national mortgages. For rate quotes, email me directly. The group's 30-day...
Mortgage bond investors own the rights to mortgage bond payments over time and the value of those payment is tightly tied to the value of the U.S. dollar. And this is where the inherent conflict in the government's plan to drive down mortgage rates comes in. With each new stimulus, the government is forced to -- literally -- print more money, thereby making the plan more expensive to execute.
I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey is now available. The Bankrate.com survey is for conforming mortgages. It does not apply to FHA mortgages, VA mortgages, or jumbo mortgages. For rate quotes, email me directly. Here are the group's 30-day mortgage...
I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey is now available. The Bankrate.com survey is for conforming mortgages. It does not apply to FHA mortgages, VA mortgages, or jumbo mortgages. However, I do lend on all of these loan types in all...
I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey is now available. The Bankrate.com survey is for conforming mortgages only. It does not apply to FHA mortgages, VA mortgages, or jumbo mortgages. However, I do lend on all of these loan types in...
