Last Week's Recap
Mortgage rates built on their rally last week, extending it to three in a row.
Given last week's news on this side of the pond, rates should have moved higher. Domestic news:
- The Federal Reserve said the economy continues to strengthen
- Consumer Confidence pushed to a 2-year high
- 4th Quarter domestic output exceeded Wall Street's expectations
It was the other side of the pond that drove rates lower: a report from Standard & Poor's said that U.K. banks are no longer among the most stable. That research triggered a flight to quality that pumped up the Dollar and helped mortgage rates.
This Week's Mortgage Rate Predictions
This is going to be another tough week to handicap. We opened today with key inflation data and it wasn't that hot. Yet, rates are rising as mortgage bonds are off about a quarter of a point (in discount points, not rate). Combined with the Fed's repeated statements last week about inflation being under control, the market is still not acting like you would expect.
The next big report is Wednesday with the ADP report. It's a precursor to the government's report due Friday.
Expectations are for ADP to show roughly 85,000 jobs lost. If more jobs were lost, rates go lower. If less jobs were lost, rates go higher. The same thing will happen on Friday.
- December in review: Opened month near the best rates of all time, then sold off by 3 full discount points by the New Year
- January in review: Since peaking on the last day of December, mortgage bonds have taken back almost two-thirds of the overall loss from the month prior.
- February in advance: We open the month at 5% on the benchmark 30 Year Fixed. If you're considering a rate lock or float decision, it's an interesting time. The risk:reward is probably 2:1. For every .125% you could save by rates going lower, you probably have an equal chance of rates turning and going .25% higher.
Lock or float advice this week is really a coin flip where you get $30/month from the bank if you win and pay an extra $60/month if you lose. Are you feeling lucky?
