Mortgage Rate Predictions | This Week | March 8, 2010

Mortgage rates improved on almost all loans for first time home buyers last week.

The volume was relatively light, saw rates improve for the first four days, and then get slapped back down after Friday’s jobs report beat expectations.

Overall, mortgage rates dropped last week, but only by a small margin.   Rates were best Thursday afternoon.  It was the second consecutive week in which mortgage rates fell.

It was an odd week in that both mortgage rates and stocks improved.

Mortgage Rate Predictions For This Week

Expect volatility.  We have a few things all happening at once.

It’s a light week in terms of data with just Consumer Confidence and Retail Sales due out.  We could see momentum swings driving the trading and that is not good for rates.  If there is change, rates are significantly more likely to go up than down.  If there’s no volatility, then the rates stay where they are.

The Federal Reserve is only 3 weeks away from ending its support of the mortgage market.  For weeks, money has been pouring into the country as a US investment seemed safer than anywhere else in the world.

If the Fed is no longer buying mortgage bonds AND foreign investors decide to sell them to return their investments to other markets, rates can get very ugly, very fast.

Early spring has always been a cheaper time to buy a home rather than waiting for all of the other buyers to get out in the market.  With the $8,000 first time home buyer tax credit looming, rates at the edge of a potential cliff, and the confidence of sellers slightly battered, buying in March rather than April seems smarter than ever.

Last week was also interesting in that both stock markets and bond markets improved, proving that rates don’t always rise when stock prices do. 455 of the S&P 500 companies posted gains last week.

If you’re shopping for a home or a refinance, though, don’t rest on your laurels. After Friday’s big sell-off, this week opens into a major headwind and, plus, the Federal Reserve’s support for mortgage markets ends in just 3 weeks.

This week, without much data to influence traders, the upward momentum in rates may have little cause to temper. We’ll see the Consumer Confidence numbers on Tuesday and Retail Sales on Friday.  Beyond that, there’s not much else.

After last week’s performance, conforming mortgage rates in Illinois may be poised to rise rather sharply. If you’re waiting for the right time to lock your rate, it may have been this past Thursday. Consider locking your rate early this week to protect against further rate hikes.

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