What Was Affecting Mortgage Rates This Week?

Posted on 30 January 2010 by vvandervort

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This information comes from a very professional mortgage broker/banker I work with, Mike Farrell with Princeton Capital.  Mike has several times saved buyers and sellers in transactions when other lenders couldn’t perform. 

The links in the “Economic Update” section will take you to great news articles about what happened with the listed reports that came out this week.  You should be well on your way to being an economist if you real through all of them! They are actually very interesting.

Timely Topic: Support for Bernanke Gains Momentum
The political winds appear to be shifting in Federal Reserve Chairman Ben Bernanke’s favor, as the White House escalated efforts to win the 60 votes needed in the Senate to confirm him for a second term and Senate Republican and Democratic leaders predicted those efforts would succeed.

But despite a flurry of activity over the weekend of January 23rd and 24th, confirmation wasn’t a certainty. As of late Sunday January 24th, 31 senators were publicly committed to voting for Mr. Bernanke, with 17 opposed, according to a Dow Jones Newswires survey. The Senate is expected to vote before Mr. Bernanke’s term expires on Jan. 31, Senate Democratic staff members said.

“He’s going to have bipartisan support in the Senate and I would anticipate he’d be confirmed,” Sen. Mitch McConnell of Kentucky, the Republican leader, said Sunday on NBC’s “Meet the Press.” But he wouldn’t say which way he would vote. The No. 2 Senate Democrat, Dick Durbin of Illinois, also predicted that Mr. Bernanke would prevail.

The drama surrounding Mr. Bernanke’s fate likely will eclipse attention to the meeting of the Fed’s monetary policy committee Tuesday and Wednesday. No major shift in policy is expected. The Fed has been holding short-term interest rates near zero since December 2008.

Economic Update:
Last Week:
Not only did Friday January 22nd mark the stock market’s third straight loss, but it also marked its worst single-session percentage drop in more than two months. The recent string of losses has been underscored by a sell-the-news mentality among investors.

What’s Ahead:
This week is extremely busy in terms of economic data scheduled for release and will likely be an active week for mortgage rates.

January’s Consumer Confidence Index (CCI) will be released Tuesday (the 26th) morning. This report is considered to be of high-importance to the bond market and therefore can move mortgage rates. Since consumer spending makes up two-thirds of the U.S. economy, market participants are very attentive to related data. A reading smaller than the expected 53.5 would be ideal for the bond market and mortgage rates.

December’s New Home Sales report, the sister release to Monday’s Existing Home Sales, will be posted late Wednesday (the 27th) morning. It is expected to show an increase in sales of newly constructed homes, but is not important enough to heavily influence mortgage pricing.

Wednesday (the 27th) is this year’s first FOMC meeting. It is expected to yield no change to short-term interest rates, but as is often the case, traders will be looking for any indication of the Fed’s next move and when they may make it.

Friday’s (the 29th) release is arguably the single most important reports that we see regularly. The initial reading of the 4th Quarter Gross Domestic Product (GDP) will be posted early Friday morning. This data is so important because it is considered to be the best measure of economic growth. Its’ results usually have a major impact on the financial markets and can cause significant changes in mortgage rates.

Overall, look for Tuesday or Friday to be the biggest days for mortgage rates. Friday’s GDP is the single most important piece of data this week, but we may see quite a bit of movement in rates Tuesday also.

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