Interest Rates!

Well it finally looks as though the Government is trying to help us, the homeowners. Recently they injected 800 billion into the market specifically in mortgage backed securities and other similar investments aimed at improving interest rates and getting the economy jumpstarted.

Here is the article if you would like to read about what is going on:
http://online.wsj.com/article/SB122765938507058417-email.html


Interest rates have definitely improved since they have done that and so here is a snapshot of where they are now:

30 year Fixed: 5.375%
15 year Fixed: 5.125%

If you have a higher rate, but aren’t sure it is worth it to refinance than you can give me a call or go to http://workharding.com/loancenter-calculators-interestsaving.aspx where you will find a helpful calculator that can determine if it is worth it to refinance or not.

We don’t know how long interest rates will stay low, so let’s get started on your refinance or purchase now!

Why Mortgage Rates Haven't Falled As Expected

When the government nationalized mortgage lending in September, housing analysts predicted lower mortgage rates.

For a brief two-week stint, they were right -- post-takeover, the 30-year, fixed rate mortgage fell below 6.000 percent nationally for the first time in 7 months.

Since then, however, mortgage markets have reversed. Rates are now at pre-takeover levels.

Now, this isn't to say that the nationalization was a failure -- far from it. The government's takeover of Fannie Mae and Freddie Mac accomplished two very important goals:

-- It restored failing confidence in the U.S. mortgage markets
-- It opened legislative channels for faster, more relevant housing reform

And, long-term, most people agree, these are essential elements for a U.S. economic recovery.

Over the short-term, however, the plan has not delivered the sustained low mortgage rate environment that was envisioned.

The biggest reason why rates are higher is because of Wall Street's manic trading behavior.

When the economic outlook shows hints of sun, investors sprint to risky stock markets; when it shows signs of gloom, they flee in favor of ultra-safe treasuries. The buy-sell patterns have led to some of the wildest trading days on record and it's not what the Treasury expected.

See, when the takeover was first announced, mortgage-backed bonds were elevated to "government status". This created new demand for mortgage bonds which helped to push down rates. But, in the weeks that followed, the world's credit markets unraveled and traders sought the dual comfort of safety and liquidity in their portfolios.

That's a combination that only U.S. treasuries can provide. Versus "true" government bonds, mortgage-backed securities are just quasi.

We can't know where mortgage rates will move for certain but, for now at least, the 4 percent range some had predicted is out of reach. Until credit order is restored globally, expect volatility to continue and rates to remain up.

(Image courtesy: The Wall Street Journal)

Where Are Rates Going?!

I've been getting a disproportionate amount of "Where do you think mortgage rates are headed"-like questions from my clients lately.

If you're among the curious, just ask your question aloud, then click the "Shake Me" button on the Magic 8-Ball at right.

The answer you get will be as accurate as any other one but at least the 8-Ball reminds you that it's for Novelty Purposes Only.

The guys on CNBC don't use that disclaimer.

Because mortgage markets are in a funny place right now, making any kind of prognostication is extra-difficult. Versus the "normal" environment in which mortgage rates indirectly correlate to a few, well-known influences, this "abnormal" market negates the usual associations.

In a "normal" market:

-- When the U.S. dollar gets stronger, mortgage rates tend to fall
-- When concerns of inflation are rampant, mortgage rates tend to rise
-- When there are threats to financial markets, mortgage rates tend to fall

Lately, none of these relationships have held because mortgage markets are wildly dissociated.

As the dollar strengthens, mortgage rates rise; as rate cut talk grow, rates edge lower; as stock markets sell off, mortgage bonds lose out to cash.

It's dogs and cats living together -- mass hysteria.

Strangest, though, is that experts finger the U.S. housing market as the turmoil's root cause, even as they ignore signals of its rebirth. In the last two weeks, housing has kicked out a ton of positive data that is getting very little press coverage:

-- Homes under contract to sell are rising and exceeding estimates
-- Foreclosures are falling nationwide, led by California
-- "Used" home sales are rising, reducing home supply more than was expected
-- "New" home sales are rising, further reducing home supply

Now, stats like this are kind of like pictures in a flipbook. Individually, they don't mean that much; it's when you put them all together that the magic happens. And so to look at the data as a group, we can infer that the national housing market is finding a psychological balance between buyers and sellers.

Finding balance in housing should be good news for the mortgage market, of course, but not today. Instead, mortgage markets are a casualty of forced selling out of hedge funds and other institutional investors. In need of cash, the funds are indiscriminantly selling what they got -- including mortgage-backed bonds. The excess supply is driving bond prices down, causing mortgage rates to rise.

As for what will happen tomorrow, though, who knows -- except maybe the Magic 8-Ball.

(Magic 8-Ball Courtesy: Mattel.com)

Looking Back And Looking Ahead: October 20, 2008

Last week, the Dow Jones Industrial Average recorded both its largest one-day point gain and second-largest one-day point loss in history.

Mortgage markets got whipsawed, too.

From day to day, huge rate swings made mortgage rate shopping difficult. It wasn't uncommon for lenders to change pricing 3 times per day.

When the week closed, though, rates were lower than at Market Open Monday, marking the first week of improvement in mortgage rates since early-September.

Last week's constant mortgage rate movement had several causes:

-- Retail Sales data was weaker than expected
-- The Federal Reserve report showing a slowdown in all 12 regions
-- New evidence that commodity inflation pressures are easing

The biggest driver was -- and continues to be -- trader uncertainty.

As measured by the "Fear Index", market volatility reached an all-time high last Thursday. Investors moved into cash positions, selling assets of all types -- including mortgage bonds. This created an excess supply of bonds on the market which drove down prices and, in turn, pushed up rates.

But, there was a demand-side issue impacting rates last week, too.

If you'll remember, the first $250 billion of the government's Rescue Plan was meant to buy bad mortgage debt. Last week, however, those plans changed. Instead, the $250 billion was applied to the balance sheets of the nation's largest banks.

This caused an immediate $250 billion reduction in mortgage bond demand and the reduced demand further depressed prices. Again, mortgage rates rose as a result.

This week, with very little economic data, expect psychology, politics and corporate earnings to drive mortgage rates -- more than 20% of the S&P 500 will report their July-September 2008 numbers.

If earnings are weak, expect mortgage rates to rise on concerns about recession; lately, that has been the market pattern. Conversely, if earnings are strong, expect mortgage rates to improve.

(Image courtesy: The New York Times)

Looking Back And Looking Ahead: October 14, 2008

Throughout the feverish activity on Wall Street last week, mortgage bonds sold off with force, driving mortgage rates to their highest levels since July.

It was the fourth straight week in which mortgage rates worsened.

But, with the mortgage markets closed Monday, stock markets rallied to their largest one-day gain in history.

The Dow Jones' gains are expected to push mortgage rates down today, but not nearly enough to recover last week's losses. The market-wide carnage was mostly the result of a fear that has not been completely removed from investor psychology.

Until that fear is purged, therefore, expect mortgage rates to move on the dual basis economic data and market mentality. This will likely lead to rapid rate changes that will make shopping for a mortgage rate difficult.

This week, look for key inflation data including the Producer Price Index on Wednesday and the Consumer Price Index on Thursday.

Both measure the "cost of living" and reflect on price pressures in the economy. If costs are rising, it's considered inflationary and that tends to edge mortgage rates higher.

In addition, Retail Sales and Consumer Confidence data will be released this week and carefully watched. If either (or both) show strength, markets may interpret the data to be inflationary as well, further adding upside pressure to mortgage rates.

(Image source: The Wall Street Journal)

The Effect Of The Fed's Emergency Half-Point Rate Cut To 1.5%

The Federal Reserve made an "emergency rate cut" this morning, dropping the Fed Funds Rate by one half-percent to 1.500 percent.

The move is meant to stimulate the U.S. economy.
When the Federal Reserve changes the Fed Funds Rate, it often takes 9 months for the changes to work their way through the economy.

On a broad scale, therefore, we won't know if the cut truly "worked" until Summer 2009.

But, as it relates to Americans in general, the rate cut spurred two immediate changes.

First, because Prime Rate is directly tied to the Fed Funds Rate, Prime Rate fell by 0.500 percent today, too. That means that interest rates on credit card debt and home equity lines of credit are now lower, reducing monthly interest costs for the majority of American households.

The second change is that mortgage rates are rising today.

The Fed's actions today sparked optimism in some corners of Wall Street and money is now flowing into the stock market at the expense of bonds. Because mortgage rates move in the opposite direction from bond demand, mortgage rates are higher this morning.

As always, mortgage markets and mortgage rates remain on edge. Therefore, rates are subject to change. And quickly. If you see a rate and payment you like, be ready to commit to it because it likely won't last long.

(Image courtesy: USA Today)

One Good Thing About The Stock Market Tanking Yesterday

Monday, the Dow Jones Industrial Average closed below the psychologically-important 10,000 level for the first time since 2004.

Despite the milestone-marker breach, however, there was a large group of Americans with reason to cheer. As stocks sold off, mortgage markets rallied to the benefit of home buyers and mortgage rates shoppers everywhere.

Conforming mortgages rates improved yesterday.

Most interesting here is that rates improved for the same reason that the stock market fell.

Because of lingering concerns about the worlds' economies, investors lost their collective appetite for risk Monday. In response, they sold their stock positions and parked the proceeds in the "safe haven" of U.S. government-backed debt.

The extra demand for safe investments pushed up the prices on mortgage bond which, in turn, pushed down mortgage bond rates.

Now, we can't predict when the market's risk appetite will return, but when it does, expect money to flow into stocks just as quickly as it left.

All year long, with respect to stock markets, it's been either "everybody in" or "everybody out" and, for now, it's everybody out. This is why mortgage rates fell Monday.

But, when the momentum shifts -- and it will shift -- mortgage rate shoppers would do well to be prepared. Be ready to lock that mortgage rate because as soon as the stock market reverses course, mortgage rates will head higher.

And if stocks recover as quickly as they tanked, expect mortgage rates to spike badly.

(Image courtesy: USA Today)

Fannie Mae Halves One Of It's Mandatory Loan Fees

In an effort to provide "the most market support possible", Fannie Mae is cutting one of its mandatory loan fees by 0.250 percent, effective immediately.

Fannie Mae introduced the Adverse Market Delivery Charge in December 2007 to offset foreclosure and delinquency losses. The initial fee was a quarter-percent of the amount borrowed.

Then, as market conditions worsened, Fannie Mae doubled its across-the-board loan fee to 0.500 percent in August of this year.

As of today, the fee is back to its starting point.

Since the start of the 2008, Fannie Mae has made 21 separate changes to its mortgage guidelines. Most have been detrimental to borrowers, increasing the difficulty, or the cost, of qualifying for a conforming home loan.

Today's change is among the few that are beneficial.

This morning, mortgage pricing is edging higher because of the looming Congressional vote and Wall Street's reaction to the weak jobs report. The good news is that price changes could have been worse.

Fannie Mae's Adverse Market Delivery Charge flip-flip is keeping rates from rising as high as they might have otherwise risen today.

How Mortgage Rates Responded To The "No" Vote On The Bailout Bill

Monday afternoon, the U.S. House of Representatives defeated the $700 billion "Bailout Bill", surprising Wall Street and the world.

The Dow Jones Industrial Average responded by falling 777.68 points -- its largest one-day loss in history and, this morning, every newspaper in America is covering the story as front page news.

Lost in the coverage, however, is how the "No" vote created a terrific opportunity for mortgage rate shoppers.

Yesterday, as money fled the tanking stock market, most of it ended up getting parked in the relative safety of government-backed bonds which includes, of course, the mortgage bonds. This rising demand for mortgage bonds caused rates to fall.

To investors, stock markets represent risk and bond markets represent safety. So, when market sentiment changes, as it did yesterday, Wall Street players often shift their dollars from one forum to the other. This is why yesterday's stock sell-off was good news for mortgage rate shoppers -- the added demand for "safe" securities drove down rates.

Conforming mortgage rates were lower by about an eighth-percent Monday.

Now, today, mortgage rates are opening flat, suggesting that markets are in a Wait-and-See Mode. Wall Streets knows that the defeated bill will re-emerge later this week and, when it does, expect traders to respond accordingly.

If the new-look bill is viewed as favorable to U.S. businesses without harming taxpayers, expect stock markets to improve and mortgage rates to rise. If the bill fails to accomplish that goal, however, expect mortgage rates to improve.

Looking Back And Looking Ahead: September 22, 2008

In a historic week for American Finance, mortgage rates rose considerably, reversing a 3-week trend through which rates had fallen.

The U.S. Treasury is the biggest reason why most conforming mortgage rates increased by a half-percent.

Hank Paulson's government group helped to restore investor confidence that had steadily eroded from concern to fear since July 2007, before succumbing to outright panic last week.

Wall Street nerves were so frayed that at one point

Wednesday, yields on government bonds were actually in the negative; investors were paying the U.S. government to hold and protect their money in exchange for a guaranteed loss of investment.

After the Treasury's interventions, however, a sense of normalcy returned to Wall Street. Money poured back into stocks, siphoned from the bond market and that pushed rates higher.

This week, it's anybody's guess what will happen.

From a data perspective, it's light -- there's Existing Home Sales, New Home Sales, and not much else. From a policy perspective, however, the week is heavy:

-- Congress is expected to authorize "hundreds of billions" for market support
-- Ben Bernanke and Hank Paulson will testify before the Senate Banking Committee
-- 7 members of the Fed are making public appearances

With so much rhetoric, it's difficult to predict how mortgage rates will perform this week. The stock market may be the best predictor of rates.

If stocks are up, risk-taking is back in vogue and the bond market should suffer, pushing mortgage rates higher. By contrast, if traders stay clear of stocks in search of safer investments, mortgage rates should fall.

(Image courtesy: Wall Street Journal)

The Two Groups Of People That Benefited The Most From Wall Street's 6th Largest Point Loss Ever

Yesterday, the stock market suffered its largest one-day point loss since September 17, 2001, and its sixth-largest point loss in history.

Not everyone got punished, however. Two groups of people, in particular, welcomed yesterday's losses:

1. Home buyers out shopping for a mortgage
2. Homeowners that snoozed through last week's mortgage rate drop

See, as the stock market dropped yesterday, investors anxiously moved their money away from risky investments like stocks and into the safe haven of government-backed debt.

This includes mortgage-backed debt, of course.

As traders poured into bonds, bond prices rose. They did so beginning at Market Open, all the way into Market Close. And, because mortgage rates move in the opposite direction of mortgage bonds prices, mortgage rates fell Monday. A lot.

Today, the Federal Open Market Committee meets, adjourning from its scheduled conference at 2:15 P.M. ET. In the Fed's press release, among other things, markets expect Ben Bernanke & Co. to address the financial system's stability -- or lack thereof -- that helped to fuel Monday's selling action.

If markets find the Fed sympathetic, expect stock markets to rally, and mortgage rates to rise.

Looking Back And Looking Ahead: September 15, 2008

In a week overdone with market-altering news, conforming mortgage rates shed a quarter-percent overall last week. It was the third straight week in which rates improved.

The biggest story, by far, was the government's takeover of Fannie Mae and Freddie Mac.

The two quasi-government agencies were nationalized into bona fide government agencies, converted mortgage-backed debt into risk-free, government debt.

Instantly, conforming mortgage rates fell.

But, once the news settled in, mortgage markets returned to normal and, like in weeks prior, rates mirrored the path of the U.S. dollar.

Early in the week, the dollar was helped by economic trouble in Europe and optimism about the U.S. economy. Currency traders flocked to the dollar, helping to push mortgage rates down for Americans.

But, as the week continued, dollar enthusiasm waned and mortgage rates increased. Then, Friday afternoon, the dollar -- and mortgage rates -- got shellshocked by a combination of news contributed to the dollar's worst one-day decline in six months:

-- Hurricane Ike threatened oil supplies from Texas
-- Back-to-school sales were weak nationwide
-- Lehman Brothers teetered on collapse

This week, without much economic data to digest. Wall Street's attention will be focused on Tuesday's Federal Open Market Committee meeting. Ben Bernanke & Co. are widely expected to hold the Fed Funds Rate at 2.000 percent.

But, it won't be what the Fed does to the Fed Funds Rate that will be so important Tuesday. It will be what the Fed says.

If the Fed shows worry over medium- or long-term inflation in the economy, mortgage rates should rise because inflation is the enemy of the mortgage market. Sometimes, even an off-hand reference to inflation can make that happen. By contrast, if the Fed shows little concern for inflation, it may cause mortgage rates to fall.

The FOMC adjourns and issues its press release at 2:15 P.M. ET Tuesday.

(Image courtesy: The Wall Street Journal)

Why The Government's Takeover Of Fannie Mae And Freddie Mac Is Lowering Interest Rates

When comparing two investments with equal risk, a rational person will choose the investment with a higher rate of return.

This behavior is called Risk Aversion and is a basic tenet of personal investing.

An off-shoot of Risk Aversion is that a rational person will only invest in an instrument of greater risk if the returns are greater, too.

The chart at right illustrates this concept, comparing return rates on two investments:

-- U.S. Government bonds
-- Mortgage-backed bonds

The difference in investment return rates is sometimes called a "spread" and the historical spread between government debt and mortgage debt is somewhere near 1.5 percent.

However, notice how the spread started to grow starting in July 2007.

July 2007 marked the "official" start of the Credit Crunch and as mortgage delinquencies grew nationwide, so did the market's perceived risk of investing in them.

By the start of this month, the spread had nearly doubled.

But that all changed Sunday. When the government announced its takeover of Fannie Mae and Freddie Mac, it put the same "risk-free guarantee" on mortgage debt that has helped keep U.S. government debt so cheap to finance and the spread immediately shrunk.

This is one reason why mortgage rates fell Monday and why they should continue to stay low over the near-term. With the U.S. government backing the mortgage market, there's no room for the risk premium that helped keep rates high this past year.

It doesn't mean more people will qualify for conforming home loans, but for the ones that do, financing should be cheaper.

Looking Back And Looking Ahead: September 8, 2008

Mortgage markets improved last week on Hurricane Gustav's less-than-expected damages and a strengthening U.S. dollar.

Even factoring in Friday's 0.125 percent run-up on most mortgage products, rates improved overall.

It's the second straight week in which mortgage rates improved.

But for all the news that we could dissect from last week, it should be the news from this week that proves most interesting.

This is because on Sunday, the U.S. government assumed control of Fannie Mae and Freddie Mac.

So far, the papers have done a terrific job talking about the political perspective of the takeover, and the economic perspective of the takeover, but very few have addressed the key news for homeowners -- mortgage rates are plummeting.

Mortgage rates are improved this morning because of Fannie Mae and Freddie Mac's collective role in the U.S. mortgage market.

They guarantee about half of the nation's $12.1 trillion in mortgages

They purchased and securitized four-fifths of the nation's home loans as recently as six months ago

See, earlier this year, Wall Street punished Fannie Mae and Freddie Mac for their weak balance sheets and increasing number of mortgage delinquencies. This led to Wall Street to raise the borrowing costs for the two firms across the board which, in turn, led to higher mortgage rates for Americans.

But today, with their balance sheets backed by the U.S. government, Fannie and Freddie are now viewed as "safe" by the eyes of Wall Street. Their borrowing costs have been lowered, therefore, and mortgage rates are falling in response.

This week is light on economic data but it shouldn't really matter. Mortgage rates should close the week lower than where they started for the four-fifths of the country that uses Fannie or

Freddie's conventional mortgages.

For everyone else, keep an eye on the U.S. dollar. Its strength continues to have positive consequences on the mortgage markets.

(Image courtesy: The New York Times)

Watch The Weather Channel To See Where Mortgage Rates May Head This Week

Three years to the week after Hurricane Katrina caused $81.2 million in damages, Tropical Storm Gustav is charting a similar Gulf of Mexico path.

Memories of Katrina are making oil traders nervous. The 2005 storm shut down 30 platforms and 9 refineries. And, this week, oil prices are up nearly 4 percent on fears that the market, once again, may be disrupted by storm.

Mortgage rates are edging higher on the news.

The link between oil prices and mortgage rates is not a direct one, but it's worth paying attention to.

Rising oil prices strain business and consumer budgets, creating inflationary pressures on the economy. And at no time was this relationship more evident than in May and June of this year.

As oil prices reached new, all-time highs almost daily, Americans felt the impact each time they opened their wallets -- the Cost of Living inflation gauge reached a 17-year high in July 2008.

Inflation is the enemy of mortgage rates so as inflation rises, mortgage rates tend to rise, too.

And this is one reason why mortgage rates are ticking higher this morning -- there is an overriding fear that Gustav will strengthen into a full-fledged Hurricane before making landfall, causing damage to oil refineries and shipping ports around the Gulf of Mexico.

Damage reduces oil supplies and that causes oil prices to rise. It's basic supply and demand.

Gustav is expected to make landfall Monday or Tuesday. If the storm continues on its path, we may see mortgage rates continue to trend higher. If the storm dissipates, rates should reverse.

The Markets Abnormal Reaction To July's Producer Price Index Reading

The Producer Price Index is a business inflation meter and it's now up 9.8 percent annually.

This is a huge number for PPI and represents the highest year-over-year rate of inflation since 1981.

Normally, blowout inflation like this would be terrible for mortgage rates but mortgage markets are actually improved since Tuesday's data release.

Usually, a rocketing PPI would create an inflation expectation on Wall Street which would, in turn, cause mortgage rates to rise.

Yesterday, however, that's not what happened.

Upon the PPI release, Wall Street looked at the 9.8 percent number and simply shrugged it off. "Of course PPI is high," traders thought. "Did you see how high energy costs were last month?"

Traders know that in July, oil prices reached an all-time high of $147.27 per barrel and, since then, crude is down more than 20 percent. Because of this, Wall Street has now turned its attention to the August PPI data, thinking it will much more calm than July's.

In other words, instead of fearing inflation, traders believe the worst of it is over, providing an unexpected boost to home buyers in need of mortgages. As inflation expectations fall, mortgage rates are following suit.

Looking Back And Looking Ahead: August 18, 2008

Mortgage rates overcame a terrible Monday last week, climbing back to unchanged by Friday. And like most weeks this year, rates were volatile.

Most interesting about last week, though, was that there a ton of news that should have dragged mortgage rates down, but it didn't seem to happen.

1. A popular inflation measure reached a 17-year high
2. A petropolitical war erupted in Eastern Europe
3. Whispers of more credit problems surfaced on Wall Street

Instead, a soaring U.S. dollar attracted global funds to Wall Street and a renewed demand for all things denominated in U.S. dollars, helping drive up prices in the mortgage bond market.

When mortgage bond prices move higher, mortgage rates move lower.

Like last week, the path of the dollar will likely determine in which direction mortgage rates move between today and Friday. If the dollar increases in value, mortgage rates should fall. And conversely, if the dollar decreases in value, mortgage rates should rise.

Of all the economic data hitting the wires this week, the only one of major importance is the Producer Price Index -- a "Cost of Living" reading for American businesses.

Normally, we'd pay attention to the inflation-predicting PPI because inflation causes mortgage rates to rise. This month, however, we're ignoring it. Oil prices have fallen 20-plus percent since July highs and the PPI reading from last month doesn't reflect the "current marketplace".

So, in the absence of hard data, mortgage rates should move with momentum this week. To follow along at home, keep your eyes on Bloomberg and stay close to your loan officer.
It's during weeks like this that rates can really move.

(Image courtesy: The Wall Street Journal Online)

How Russia Invading Georgia Can Affect Your Mortgage Rates Here

The connection between the world's political events and mortgage rates here at home is not always clear, but Russia's invasion of Georgia provides a strong working lesson.

Georgia is a former Soviet republic on the eastern shores of the Black Sea. Oil pipelines within its territory supply about 1 percent of the world's daily oil needs, mostly to ports in Western Europe.

Last week, Russia bombed Georgia's oil and natural gas transport systems. None of the bombs struck the pipelines, but several exploded close to it. Pipeline part-owner BP shut down two of its oil lines as a precaution, but Russia is reported to have struck one of BP's other pipelines this morning.

The cost of oil is generally based on the normal economics of supply and demand so when oil supplies are threatened, damaged, or shutdown -- because of war, weather or otherwise -- oil prices respond by moving higher.

Higher oil prices, of course, are considered inflationary and that causes mortgage rates to rise here in the United States. High oil prices, for example, are one reason why mortgage rates spiked throughout June and July of this year. And as oil prices have settled, rates have calmed a bit, too.

It's easy to ignore politics and news when it's not happening in your own country, let alone your own hometown. But that doesn't make it any less important.

When you're buying a home, or thinking of refinancing one, you'll likely need a mortgage and the rate you pay on that mortgage will be influenced by every geopolitical event in the world.

Especially when the event involves oil.


Source Russia-Georgia conflict raises worries over oil and gas pipelines Elizabeth Douglass Los Angeles Times, August 13, 2008
(Image courtesy: LA Times)

Looking Back And Looking Ahead: August 11, 2008

In a week packed with mortgage news and economic data, mortgage rates swung hard in both directions last week before settling into the weekend slightly higher across the board.

Adjustable-rate mortgages worsened more than their fixed-rate counterparts and both broke a two-week streak in which mortgage rates had improved.

But, if we look at all of the big stories of last week, there was a dramatic overweight of news that is usually "good for rates".

Those stories included:

--The Federal Reserve saying that inflation should moderate soon
--Oil prices falling 20 percent from July's highs
--Home buyers propping up home sales levels
--Foreign investors wanting to buy long-term U.S. debt
--The U.S. dollar strengthening versus foreign currencies

In the end, it turned out that the news was so good, investors decided to jump back into the stock market, propelling the Dow Jones 3.6 percent to a 6-week high. This fevered trading action drew investor money away from the bond market -- including bonds of the mortgage-backed variety -- and that pressured mortgage rates higher.

And, of course, it didn't help rates when the two biggest insurers of mortgage-backed debt posted large quarterly losses and warned of more delinquencies ahead.

Turning our attention to this week, make note that it is back-heavy on data. Therefore, expect the positive momentum of Thursday and Friday to carry through Monday and possibly Tuesday.

By Wednesday, however all bets are off -- that's when July's Retail Sales data is released. Furthermore, Retail Sales is backed up Thursday by the Consumer Price Index, a Cost of Living measurement.

Both data points are correlated with inflation so higher-than-expected readings may cause mortgage rates to rise.

Regardless, given that mortgage rates are now moving more in a hour than they used to in a day, be prepared to get your mortgage rate quotes quickly and be ready to act on them.

Just 90 minutes later, the quote could be expired.

(Image courtesy: Press of Atlantic City)

Looking Back And Looking Ahead: July 21, 2008

Mortgage rates soared last week as mortgage markets experienced a 4-day freefall.

By the end of the trading week, conforming mortgage rates had jumped by as much as 0.500 percent.

The spike in rates can't be pinned on any one factor, but 3 contributing factors include:

1. The lingering impact of high energy prices on inflation
2. The ongoing weakness of the U.S. dollar
3. A rally in the financial sector, marking a return to risk- taking

Inflation and a weak dollar both devalue mortgage repayments, a well-chronicled relationship on this Web site. In short, when mortgage bond investors find that their repayments are worth less, they demand a higher return. This causes mortgage rates to rise.

But, it wasn't inflation or the dollar that caused the majority of the damage to mortgage rates last week -- it was the rally in the financial sector.

Rates had edged higher Tuesday on the inflation data but it wasn't until Wednesday's morning stronger-than-expected announcement from banking leader Well Fargo that mortgage rates really started to spike.

In its quarterly report, Wells Fargo said that its balance sheet was strong and that it planned to increase shareholder dividends. The rosy announcement sparked a strong demand for all things financial and -- by day's end -- the sector scored a 12.3 percent gain on Wall Street.

It was the largest one-day gain in financial stocks ever.

Then, following Wednesday's rally, financials picked up additional momentum and ended up closing out the week higher by 21 percent.

Unfortunately for mortgage rate shoppers, a large chunk of the money that fueled the rally came out from the mortgage bond market.

As investors looked for cash to buy financial stocks, many chose to sell mortgage bond holdings, creating excess supply. More supply leads prices lower and, in the mortgage world, when prices fall, rates go up.

Because mortgage bond prices fell a lot last week, mortgage rates rose by a lot.

This week, expect momentum to be The Big Story. There is little data beyond Thursday and Friday's Existing Home Sales and New Home Sales, respectively, and Friday's Consumer Sentiment Index. And only a few members of the Fed will be speaking in public.

The one bright spot last week was falling oil prices.

After an 11 percent decline, Americans are waking up this morning to lower gas prices. This is anti-inflationary and could help tug mortgage rates lower.