Congress approved the $700 billion "Bailout Bill" Friday, answering the question that dogged mortgage markets all week long:
Will they or won't they pass it?
The uncertainty prior to the vote created huge market swings that ultimately sent the Dow Jones Industrial Average to its worst week since the 2001 terrorist attacks, while causing similar damage in the mortgage markets.
Mortgage rates worsened for the third straight week last week.
However, if we take the congressional vote out of the picture and look strictly at last week's data, we would have expected mortgage rates to fall instead of rise.
For example, the economy shed another 159,000 jobs, bringing the 2008 total to 760,000 lost jobs. This reduces the likelihood of inflation and is normally good for mortgage rates. In addition, the U.S. dollar had its strongest week ever against the Euro. This usually attracts buyers to the mortgage bond market, driving down rates.
And third, Fannie Mae eliminated one of its mandatory loan fees. This improves mortgage bond pricing for borrowers, ultimately leading to lower rates.
But, mortgage rates rose didn't fall last week and that shows how deep the economic uncertainty really ran. And this week, with the bill now passed into law, we would expect the market to turn its attention back to fundamentals. But it can't.
Unfortunately, there's no new data for release this week so, in the absence of data, markets should take their cues from the following sources:
- The 8 scheduled Fed speakers, including Bernanke on Tuesday
- Wednesday's Pending Home Sales report
- Persistent rumors of a "surprise" Fed Funds Rate cut
Regardless of to what markets react, though, be prepared for them to react swiftly and for mortgage rates to dip and spike -- often in the same day.
In other words, a mortgage rate quote from the morning is likely to be "expired" by the afternoon so if you see a rate and payment that you like, consider locking it. It likely won't last long.
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