It’s a mess out there.  The debt ratings for Greece and Spain were cut again.  Ireland and Portugal are struggling.   From Egypt to Libya to the rest of the Middle East, uncertainty still reigns.

Mortgage rates gave away their gains on the week on Friday to close virtually unchanged on the week.

Here are the past few weeks.  For the week ending:

• February 4th:  Bonds down 156 basis points
• February 11th:  Bonds down 72 basis points
• February 18th:  Bonds up 53 basis points
• February 25th:  Bonds up 97 basis points
• March 4th:  Bonds down 6 basis points
• March 11th: Bonds down 9 basis points

When mortgage bonds go up, mortgage rates go down and vice versa.

Volatile would be an understatement.  These have been weekly swings of .375%, no problem.  It would look like we’ve had relative calm in the past two weeks until you look at the daily trading.  We finished the week where we started, but so do roller coaster rides.  The daily figures were a mess.  Monday through Friday saw -22, -19, +56, +50, and -41 basis points.  (That won’t add up to -9 due to a monthly rollover which is as confusing as it is unimportant for right now.)

Mortgage rates are improving today.   Mortgage rates will get their direction this week from the equity markets.  How precisely that will shake out, who knows?  Crude is lower (good for rates), but some portions of the market will rally as huge disasters require huge rebuilding projects.

Mortgage rate predictions are guesswork, but predicting mortgage costs is not.  We know that FHA MIP (PMI’s cousin) is going up by .25%.  That is a direct increase in mortgage costs.  We’re seeing increases to LLPAs or loan-level price adjustments.  No matter how you slice it up, mortgages are getting more costly.

Housing sales figures had some slowdown, but that occurred during a blizzard that covered an area big enough to win a presidential election.  That’s a lot of people who were shoveling, not shopping.  Your resident blogger and gardener has noted that the 10-day weather forecasts for Chicago have tonight touching 32 degrees and we’re not seeing freezing temperatures overnight again.  Your best time to buy a home is before the tulips break out of the soil.  You’re on borrowed time now.

Do the math with me.  Distressed sales are more than 1/3 of the market and foreclosures/short sales are pretty likely to have some deferred maintenance.  Home supply is down significantly.  If you are buying a move-in ready home, there aren’t that many.   The competition for good homes is going to be tight.  A competing offer raises home prices on that home.

Mortgage rates may dip a little more this week, but they’ll need to go down at least another .25% to offset the increases in mortgage costs that hit later this spring.   Home prices appear to have stabilized and might have some pent-up demand from the aforementioned snowed-in folks from the past two months.  If you’re buying a home in 2011, sooner continues to look better than later.

Rates are at their lowest levels in almost 4 weeks.

There is not much on the schedule for release this week.  We have consumer confidence today and retail sales on Friday.

This week is all about two things:

• The economic recovery isn’t being “felt” but it is being “seen.”  Friday’s Jobs Report increased the belief that the economy is improving.
• The concern that the economic recovery will stall if energy prices sap too much money from the economy too quickly.

The former will push up mortgage rates.  The latter is interesting.  Rapid inflation is one time where the economy can tank and mortgage rates go up.

The general trend is towards higher rates.   Since last year, we’ve seen rates go from 4.23% in October’s survey to 4.95% in February’s survey.  For the weekly survey of February 10th, we’d hit as high as 5.05%.

It is also a volatile trend.  Freddie Mac releases rates weekly, lenders release them 2-3 times per day.  In the past those Freddie Mac rates were +/- 0.125% from being accurate.  Now, they might be +/- 0.375% off on any given day.

If you’re looking at buying a home in 2011, it might make sense to push your time line up.

Housing supply stats show that there will be less total homes.  With less home supply and an even smaller supply of desirable, move-in ready homes, things could get competitive.   The general housing market has nothing to due with what you pay for a home compared to whether or not there is a multiple-offer situation.

Whether or not mortgage rates go up is irrelevant.  Mortgages are going to cost more.  We have the new Fannie Mae and Freddie Mac LLPA hits plus the increased MIP on FHA loans. Added fees have the same effect as mortgage rates going up.

It’s going to be less expensive to buy for most people now than it will be in just a few months.

FHA interest rates and their conventional counterparts hit a 3-week low following four straight weeks of rising interest rates.

It’s great timing for rate shoppers and home buyers. 

We’ve been talking about 30 Year v. 5/1 ARM spreads as well as 30 Year v. 15 Year differences.  Both are historically out of whack.   The current spread between the conforming 30-year and the 5-year ARM is up to 1.15%.  Does this mean rush out and get an ARM?  NO.

It means that the market is forecasting higher mortgage rates in the future.  What it means is “plan ahead.”   This is much bigger than your mortgage rate.   Higher rates end up impacting all goods we consume, all assets that we own, and makes that $20 in your pocket buy less gas from one month to the next.

This week’s mortgage rate predictions are irrlevant.  We’re in a blip.  The rally that we have seen is related to the ongoing protests in Libya and, probably more importantly, how it extends through Bahrain and the rest of the Middle East.   That impacts this week’s rates.  

We’ve covered ”safe haven buying” repeatedly in the past few years.  It has been the single-largest force in keeping interest rates so low.  When chaos hits, like  Greece, Ireland, and now Libya, investors put their money in the safest places possible.  Mortgage bonds are one such place.  When investors seek mortgage bonds, they push up the price, and this pushes down mortgage rates.  

In effect, the very thing that is causing the mortgage rates rally is what will cause the ensuing rise in mortgage rates when this all ends.  It’s why we’re seeing this huge gap between the 30 Year and 5/1 ARM.  Why?

We’ve had inflation concerns in the background the entire time.  Inflation is on the rise.  This week, the key economic event is the Friday jobs report.  If the number comes in above expectations, watch for inflation concerns to spark again and that will drive mortgage rates up.

If you are buying a home, start by buying an umbrella.  It’s going to be a balmy 45 and rainy here on Friday.  It won’t be so balmy on Saturday and Sunday.     Chicago mortgage rates are more than likely to be higher if you decide to wait until 75 degree weather to find that new home. 

Mortgage markets improved last week as Wall Street’s concerns about the Middle East trumped its fears of inflation. Conforming and FHA mortgage rates fell to a 3-week low.

Last week marked the second straight week in which mortgage rates fell, a streak that follows four straight weeks of climbing mortgage rates.

It’s been a bout of good fortune for rate shoppers and home buyers.

In addition, according to Freddie Mac’s weekly mortgage rate survey, the average spread between conforming 30-year fixed rate mortgages and 5-year ARMs has widened further.

The two benchmark products are now separated by 1.15%. It’s the largest interest rate gap in recent history; one that yields a monthly payment difference of $68 per $100,000 borrowed.

This week, it’s unclear in what direction mortgage rates will go.

On one side, there’s ongoing unease related to protests in Libya and its neighbors, and that’s driving safe haven buying. 

“Safe haven buying” describes when investors flee risky situations and put their money in the safest places possible. Mortgage bonds are one such place, so when safe haven buying is in effect, bond demand is high so bond yields (i.e. mortgage rates) fall.

On the other side, inflation is ramping up.

Recent economic data shows that the economy is expanding, and the Federal Reserve is maintaining its accommodative growth policies. Therefore, this week, the key economic event will be Friday’s jobs report. if job creation is high, expect inflation fear to re-ignite, and mortgage rates to rise.

Another risk factor for this week’s rate shoppers is that tensions begin to settle in the Middle East, or that Wall Street gets more comfortable with rising oil prices. If that happens, safe haven buying will subside and mortgage rates will resume rising.

There appears to be more reasons for mortgage rates to rise this week than for them to fall. Plan accordingly.

If you have not locked a mortgage rate yet, this week may represent your last chance to get a low one. Talk to your loan officer and make a plan.

Last week was about a 53 bps recovery.  Today, we’re up about another 50 basis points.  That’s a staggering recovery, yet we’re still down 100+ basis points on the month.  Last week was only the second time this year that rates fell on a week-to-week basis.

Realistically, mortgage rates shouldn’t have fallen.  Food- and oil-related inflation is a major concern, the Producer Price Index hit a 2-year high, and the Philly Fed Manufacturing Index shows strong levels of growth in Q1. 

The sole reason that mortgage rates fell last week and that we’re seeing today’s interest rates improve is geopolitical.   If you want to look at CNN and figure out which way rates are going, use a tip from the folks over at Stratfor:  don’t watch the crowd, watch the military. 

In Egypt, the military wanted the regime to continue.   In Libya, some of these reports and photos are appalling.  Egypt wasn’t chaos.  Libya is in all sorts of chaos.  Chaos pushes money into safe-haven buying.   Today’s mortgage rates are improving for the same reasons that gold improved. 

Where are mortgage rates going? 

Up in general, but we could see a few days with strong rallies.   Probably.  

Last week was a gift.  Rates had zero reason to go down.   Every economic report would have pushed up rates.   We’re seeing lower rates not because we’re in for lower rates, but because there is chaos in the streets that sit atop the world’s oil deposits. 

This week is loaded with housing and rate-influential reports.   Could we see rates dip a little lower?  Possibly.  They are certainly moving lower today.   Things may indeed get worse in Libya and there may be a new Twitter hashtag to rattle us.   At some point, the market will have priced that chaos in.  

There’s also the significance issue.  A revolution and even a civil war in Libya is not at all out of the question.  But it’s a 6.4 million person country.  Cook County has 5.3 million.

This isn’t big enough to hold rates down forever.   Add to it that we’ll eventually have to digest these increasingly strong economic projections.   A strong economy is great for home prices, awful for home mortgage rates.  

If you’re looking at buying in 2011, there’s not much to contain risks of rates going higher.  

Enough about Libya and unrest.  If you’re in an area that is voting today, do it.  That’s sort of what makes us different than a lot of these places.

Mortgage markets improved slightly last week, rebounding from the worst 1-week loss in recent history. The gains were geopolitical, however; the result of instability in the Middle East region. Economic data was overlooked as investors made a broad-based flight-to-quality.

For just the second time in 2011, conforming mortgage rates fell on a week-to-week basis.

Rates shouldn’t have dropped, though. Here’s just a sampling of last week’s economic data, all of which can be tied to rising mortgage rates:

• Oil prices are soaring on supply concerns
• The Producer Price Index touched a 2-year high
• Philadelphia Fed Manufacturing Survey predicted strong Q1 growth

Furthermore, the just-released January FOMC Minutes showed an improving economic outlook from members of the Federal Reserve.

Therefore, home buyers and rate shoppers might consider last week’s rate drop a gift. Without the growing unrest in Libya, Egypt and Tunisia, mortgage rates would have moved considerably higher.

Instead, rates fell in a bout of what’s commonly known as “safe haven” buying.

In safe haven buying, global investors shun risk in favor of safer investments; usually in response to market uncertainty. Terror threats is one such event. Regime overthrow is another. Because the event’s long-term effect on markets is unknown, investors choose to move cash to safer asset classes until the future is more clear.

The extra demand for such assets drives prices up and, in the case of mortgage markets, drives rates down.

Last week, rates fell because safe haven buying was so strong. That may not be the case this week. As events play out across the globe, mortgage rates at home will be affected.

There’s a lot of economic data set for release this week, including a large series of housing-related figures. Stronger-than-expected data should cause mortgage rates to rise, safe haven buying notwithstanding.

If you’re still shopping for rates, or looking for a last chance to lock a low rate, now may be your best chance. Talk to your loan officer about a rate-locking strategy early in the week. As the situations abroad become more clear, mortgage rates should start to climb once again.

Mortgage markets worsened terribly last week. Amid more reports of an improving economy and fears of pending inflation, mortgage rates skyrocketed to their highest levels since April 2010. 

According to Freddie Mac, mortgage rates made their largest 1-week jump in more than a year last week, tacking on 0.24 percent and bringing the average national 30-year fixed mortgage rate up to 5.05%.

In some markets, rates are even higher.

Since bottoming out in Freddie Mac’s November 11 survey, conforming, 30-year fixed mortgage rates are now higher by close to a full percentage point. Home buyers across the nation have lost more than 10% of their purchasing power during that time.

Rates have also been on a historic run higher, increasing over 9 consecutive days for the first time in almost a decade. That streak ended Friday with rates dropping slightly, and rate shoppers are hopeful the momentum lower continues into this week.

It’s not likely. The week is loaded of housing data and housing has been trending better. More strong figures will bolster stock markets at the expense of bonds, driving mortgage rates higher for the 4th week in a row.

In addition, inflation-related figures will be released. That, too, can have a negative impact on mortgage rates.

• Monday : NAHB Homebuilder Confidence Survey
• Tuesday : Retail Sales, Consumer Confidence
• Wednesday : Building Permits, Housing Starts, Producer Price Index, FOMC Minutes
• Thursday : Consumer Price Index

Markets should increase in volatility as the week progresses because of the looming 3-day weekend. Volume will be light Friday in advance of President’s Day.

If you haven’t yet locked your mortgage rate, the time to act is soon — possibly now. Mortgage rates are well off their historical lows, but still relatively inexpensive. Before long, that may no longer be the case.

Better-than-expected retail sales and positive job growth buoyed stock markets and sank bonds.

Mortgage rates in Illinois rose for the 4th time in 5 weeks last week, extending a losing streak which dates back 4 months.

Today, fixed, conforming rates are three-quarters of a percent higher as compared to the market’s low point, November 3, 2010. For a $200,000 home loan, that size rate hike equates to an increase in a monthly mortgage payment of $89 per month.

Mortgage rates are at their highest levels of the year and, this week, they may continue ticking higher.

There isn’t much data set for release this week so markets will take their cues from two major events — one economic and one political.

The major economic event is Fed Chairman Ben Bernanke’s testimony to the House Budget Committee late-Wednesday. Chairman Bernanke is expected to speak about employment, but will likely touch on other topics of import including economic growth, the U.S. dollar, and the nation’s debt ceiling.

The Fed Chairman’s comments will move mortgage rates in one direction or the other, so locking in advance of his testimony may be prudent. Mortgage rates have more room to rise than to fall, after all.

The second major event is Egypt’s ongoing political strife. By Thursday of last week, Wall Street had shrugged off the region’s crisis and unwound the safe-haven trades that had helped mortgage rates during the week prior.

If instability returns, mortgage rates, once again, will be pressured lower.

Regardless of your rate-locking plan for this week, it’s important to recognize that, although rates have risen, they’re still well below historical average. Therefore, rates may have a lot of room to move higher, still.

If you’re shopping for a mortgage, or are now under contract, consider locking your rate as soon as possible.