Early last week, mortgage rates rose on strong consumer spending and Warren Buffett's offer to assume $800 billion in debt from three major bond insurers.   

Both reports were interpreted as signs of long-term strength in the economy, leading mortgage rates higher for long-term products such as the 20- and 30-year fixed rate mortgage.

Meanwhile, Fed Chairman Ben Bernanke painted a different picture about the economy's health. 

In his testimony to Congress, Bernanke called attention to credit market weakness and alluding to a need for future Fed Funds Rate cuts.

The chairman's testimony, coupled with the worst consumer sentiment reading in 16 years, helped to hold short-term mortgage rates flat, even as long-term rates were rising. 

In this holiday-shortened week, there is very little data and only one Fed speaker to influence the markets.  Therefore, expect external pressures to weigh on market sentiments this week.

The lingering questions about the economy's health remain and so long as that uncertainty exists, mortgage rates will stay unsettled. 

We've seen extreme bouts with volatility since December and there's little reason to suspect it will stop now.

(Image courtesy: Bankrate.com)