Weak economic data and less than stellar corporate earnings sent mortgage markets on a downward turn last week.  As such, rates rose a second week and are now a bit higher than they were at their average low point seen three weeks ago.

What many of you might not know, is that the most important news affecting mortgage rates was not necessarily the most well-reported news (I know you are shocked to hear this).    Perhaps the best example of this was Treasury Secretary “in waiting” Tim Geithner’s statement that China may be manipulating its currency.  Why should we care about China’s currency situation?  Simple…

You see, China is one of the largest buyers of U.S. mortgage-backed bonds, and our mortgage rates move downward as China purchases more of these bonds.   If China becomes angered, as was reported  in Saturday’s edition of the Washington Post, they’ll likely become less inclined to purchase U.S.-backed debt.  This, in turn would move mortgage rates upward.  See the connection?

Other mortgage rate-altering stories included:

• Microsoft, GE, and most U.S. banks reported corporate weakness
• Rumblings that political in-fighting could derail a stimulus plan
• Increasing job losses in nearly every economic sector

The Mortgage Market Roller Coaster Ride Continues

Today’s economic landscape isn’t just rocky, it’s turned upside down!  Case in point:

Normally, periods of economic weakness will push mortgage rates lower.  However, in this market, mortgage rates seem to be rising!  Right now, borrowers are at the mercy of Wall Street’s fickle sentiment - and it’s a bit unsettling to say the least.

We may see some relief this week, as a small number of news releases including Existing Home Sales, New Home Sales and consumer confidence surveys should help to clear up some things regarding where our economy really stand.

Above all else, look for the Federal Reserve’s 2-day meeting to steal the spotlight, as the Uncle Ben and company are expected to hold the Fed Funds Rate at its current range of 0.000-0.250 percent.  If it comes in too large, look for mortgage rates to climb further, whereas a smaller than expected, or “just right” - sized rate move could bring them down again.

Images:  Chart  -  Wall Street Journal;  Geithner - Associated Press