Mortgage rates jumped last week for the second week in a row.  Largely, this was from hotter-than-anticipated inflation data and a surprise move by the Federal Reserve.

Loans for first time home buyers rose by the largest margin in any week since late-2009.  In brief, last week was all about the Federal Reserve.  The news we expected was the release of the FOMC January meeting minutes.  This revealed a significantly more optimistic Fed than you would have thought based solely on the brief press release from a few weeks back.  That wasn’t the big news, however.

The Fed surprised the market by electing to raise the Discount Rate by .25% from .5% to .75%.  This is a sign of a return to norms–in response, Wall Street returned to a more risk-tolerant trading trend and mortgage bonds sold-off as a result.  Now, the Fed Funds Rate won’t climb anytime soon and neither will Prime Rate, but the Fed has sent a clear message to the markets — The Era of Loose Monetary Policy is over.  That’s definitely a good long-term economic change.  It will mean some painful increases to rates in the near future.

Mortgage Rate Forecast For This Week

News, news, news, and more news.  Here’s what we see this week:

• Tuesday : Case-Shiller Home Price Index, Consumer Confidence
• Wednesday : New Home Sales
• Thursday : FHFA Home Price Index, Initial Jobless Claims
• Friday : Existing Home Sales, Personal Consumption Expenditures

With the markets already nervous, any indications of better-than-forecasted results will likely drive up rates on most first time home buyer loan programs.  In times of rapidly rising rates, pay attention to the state-sponsored programs as they don’t rise quite as quickly.