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November 29th, 2010 (Modified on December 1st, 2010)

Mortgage rates level off, but may soon rise



Mortgage Rate Concept Last Monday we posted about mortgage rates (for the week ending 11/19) which rose to mid-September levels. The fact that last week’s figures leveled off means there isn’t an immediate cause for concern, but it may be a sign of things to come, especially if the economy continues its gradual upward progression:

The most recent economic news, though, shines a rosier light on the economy, and if economic improvement is actually gathering steam, mortgage rates are less likely to move lower to any great degree, barring any new widespread crisis.

As of last week…

After a fourteen-basis point jump during the week ending November 19, HSH.com’s overall mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — revealed that the average rate for 30-year fixed-rate mortgages moved just two basis points higher (.02%), ending HSH.com’s national survey at 4.78%. For low-downpayment homebuyers or refinancers with only a slight equity position, FHA-backed loans are available at an unchanged average rate of 4.43%, while the overall average rate for 5/1 Hybrid ARMs was 3.63% for holiday-shortened week. HSH.com’s public mortgage interest rate data series include rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so covers much of the mortgage-borrowing public.

More evidence of a gradual economic improvement:

An upward revision to third quarter GDP led off the week [ending 11/19]. The second estimate of growth during the period was improved to an annual rate of 2.5%, a considerable improvement over both the initial estimate and the meager 1.7% clip of the second quarter. The third quarter of course ended almost eight weeks ago, and all indications are that somewhat stronger growth has been taking hold in the fourth quarter, lending hope that a more self-sustaining recovery will get a toehold. These improvements come even before there are any measurable effects of the Fed’s latest gambit to spur economic growth, which kicked in earlier this month.

As we’ve stated several times before, a strengthening economy leaves little room for mortgage rates to fall:

With the warming of the economic data, mortgage rates don’t really have much reason to decline. At the moment, even mildly improving fundamentals suggest firmer interest rates are to be expected, but there’s no reason for them to move upward by very much in this climate, either. It seems to us that a lot is riding on the next employment report, due [this] Friday. If the pattern of layoffs is any indication, hiring may be picking up a little more than expected, particularly in private employment, which added 159,000 people to payrolls last month. If the report comes on the stronger side, mortgage and interest rates in general will have some space to rise. Until then, and if not, we may simply have found a new level to hang around at as we wait for true faster economic growth.

CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “Mortgage Rates Level, May Yet Rise.”

HSH.com’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.

3 Responses to “Mortgage rates level off, but may soon rise”

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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