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Jumpy Rate Market Response To GDP & Home Sales Reports
Rates dropped 0.2% early last week then rose Friday to end the week even. The $109b in Treasury auctions throughout last week caused mortgage bonds to sell off slightly, and July’s record low New Home Sales (down 32.4% year-over-year) and Existing Home Sales (down 25.5% year-over-year) helped mortgages rally— rates rise on bond selloffs and drop on rallies. But then two factors caused a huge 59 basis point selloff Friday:

(1) The second of three 2Q2010 GDP readings showed the economy grew at 1.6% versus expectations of 1.4%. This was a big drop from both the first 2Q reading of 2.4% and the final 1Q reading of 3.7%. Normally economic weakness of this magnitude would cause a mortgage bond rally, bringing rates down. But the opposite happened because traders didn’t think the 1.6% number was weak enough. more…

Rates are up about .125% following a mortgage bond selloff late last week, but rates are still at unprecedented lows. There was very little economic news last week, and the selloff (which pushes rates higher) came as bond markets traded on two main factors that will continue next week.

Rate Factors Week of August 23
First is market calendar for the week beginning Monday, August 23. We have July’s Existing Home Sales (from the NAR) and New Home Sales (from the U.S. Census Bureau) Tuesday and Wednesday, then the second reading of 2Q2010 GDP and Consumer Sentiment on Friday. more…

Normally this report is measured, but it’s hard to temper the current situation: we’re in an unprecedented government credit explosion. Low rate bonanza. Full tilt refi boom. Best time for homebuyers who select the right deal.

The ironic reason for this boom is that is that global developed economies are so unstable because of the last credit boom. But the late-1990s to 2007 credit boom wasn’t just loose monetary and fiscal policies, it was also loose credit standards born out of sweeping financial deregulation. We all know the story: Home loans made to unqualified (mostly U.S.) borrowers underpinned bond funds around the globe and countless derivatives were created from those bonds—and it all crashed when home prices plummeted.

At least this time credit guidelines are more strict, as any homebuyer or refinancer knows all too well. Getting a mortgage funded involves painstaking scrutiny of borrower and property profiles. The rewards, of course, are the rates. You can view current rates below and see this rate chart from 1971-Present. more…

Rate Snapshot
Conforming, Jumbo, and FHA rates ended last week at record lows again (see rates below), which makes a two-month streak of record lows. A significant rate spike is not expected in the near future, but it’s also not likely rates will stay this low. Here’s why rates could tick up next week.

How Bond Markets Affect Mortgage Rates
We will see June Retail Sales figures Wednesday, June business inflation figures Thursday, and June consumer inflation Friday. These reports are important, but will likely show continued tame inflation and tentative consumers, which won’t surprise rate markets. more…

Rate Snapshot
Rates have dropped steadily since May 6 and hit two new record lows in each of the last two weeks. Rates for Conforming loans up to $417k, Super Conforming loans $417k-729k by county, FHA loans, and jumbo loans above $729k are below. Here is a chart showing Conventional (non FHA) 30yr Fixed mortgage rates from 1971 to Present (FULL SIZE CHART). The all-time record low of 4.58% with .7% in points was set the week ending July 1. Here’s the fine print on rates used in the chart. The fine print on the rates in this WeeklyBasis report is at the bottom of the report.

Why Rates Are So Low
In an unprecedented rate stimulus exercise from January 1, 2009 through March 31, 2010, the Federal Reserve bought $1.25 trillion in mortgage bonds. Rates are tied directly to mortgage bonds, so when those bond prices rise on buying rallies, yields (or rates) drop. Rates were already near all-time lows as of March 31 when the Fed ended its program. more…

Rate Snapshot
It’s quite surprising that rate volatility has been minimal for three weeks. As such, zero-point rates on 30yr fixed Conforming loans (up to $729k) held last week near record lows for a third straight week, and one-point rates on Jumbo loans (above $729k) remain steady in the low- to mid-5% range. Rates for each category below.

Rate Factors Week of June 21
Volatility could return with a full economic slate next week. Here’s the market moving data for the week, each noted with what impact it could have on rates: more…

Zero-point rates on 30yr fixed Conforming loans (up to $729k) held last week near record lows for a second straight week, and one-point rates on Jumbo loans (above $729k) are steady in the low- to mid-5% range.

Rate Lock Advisory Week of June 14
WeeklyBasis continues its rate lock bias going into next week because European debt problems that caused U.S. rates to drop during May and early-June are easing, and rates could reverse as a result.

This coming market week of June 14-18 is likely neutral for rates. We’ve got business and consumer inflation reports Wednesday and Thursday, and housing starts and building permits Wednesday. The X-factors for rate markets are ongoing global debt fears, and continued Senate and House debate to reconcile their two versions of financial reform bills. Mortgage bonds remain in a slightly overbought state, and if these bonds sell off, rates would rise. more…

Zero-point rates on 30yr fixed Conforming loans (up to $729k) begin the week back at record lows, and one-point rates on Jumbo loans (above $729k) are steady in the low- to mid-5% range. The European debt crisis flared up again last week and Friday’s jobs report was drastically lower than expected. The result was that global investors continued to be net buyers of Treasury and mortgage bonds as a safe haven, and when mortgage bond prices rise on these buying rallies, rates drop.

Record Low Rates To Start Week
As of market close Friday mortgage rates were again at their lowest levels since 1971. Here is a chart showing this. more…

Zero-point rates on 30yr fixed Conforming loans (up to $729k) begin this week up about .125% after touching record low levels the week of May 17, and rates on Jumbo loans (above $729k) are steady. Rates are holding just above record lows because global investors continue to be net buyers of Treasury and mortgage bonds as a safe haven from European debt problems and stock weakness. When mortgage bond prices rise on these buying rallies, rates drop.

Eurozone Problems Lower U.S. Rates
Debt concerns in Eurozone countries continue as we enter June, with ratings agency Fitch downgrading Spain from AAA to AA+ on Friday, and France acknowledging that their ratings are justifiably at risk. As for stocks, the Dow and S&P lost 7.9% and 8.2% respectively in May, the worst losses in five quarters. more…

Zero-point rates on 30yr fixed Conforming loans (up to $729k) ended last week at their lowest levels since official records began in 1971, and Jumbo 30yr fixed loans (above $729k) touched the low-5% range. By the time last week’s rate levels are officially announced by Freddie Mac on May 27, rates are likely to be higher. Below is a recap of how rates got here and rationale for why rates may rise next week.

Why Rates & Stocks Have Dropped
The Dow dropped 1000 points before closing down 348 points on May 6. The press has dubbed it a “Flash Crash,” but let’s go beyond the clever label to understand what happened that day, why the Dow is down 675 points since that day, and why mortgage rates are down .25% since then. more…