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August 31st, 2009

Rates Not Rising Despite Improving Economy

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According to the latest issue of HSH’s Market Trends Newsletter, “Markets Feeling Good, For Now,” the improving economy should bring higher rates along with it, but as of now, that hasn’t happened.

“While the sun’s not nearly out yet, the economic sky seems to continue to brighten. Usually, that would start to foster somewhat higher interest rates — but apparently, not yet.”

“For their part, mortgage rates are flat. The overall average rate for 30-year fixed-rate mortgages revealed in HSH’s Fixed-Rate Mortgage Indicator (FRMI) was unchanged at 5.63% this week. The FRMI’s 5/1 Hybrid ARM counterpart rose by a single tick to 4.92%, and at 5.32%, conforming 30-year FRMs moved just two basis points higher for the week.”

“We speculated a few weeks ago that the path or tempo of market-based interest rate increases might be a little different than the typical “economy’s getting better so rates must rise” scenario. As such, we might not see immediate rate increases in reaction to “good” economic news.”

“Aside from the enduring support of the Federal Reserve, which continues to buy up mortgage-backed securities and agency debt, our premise is that interest rates being offered for new loans reflect to a considerable degree the riskiness of loans already held by lenders, a kind of built-in firmness as delinquencies and defaults (for loans of all stripes) continue to run hot.”

Click here to continue reading “Markets Feeling Good, For Now.” HSH’s free weekly Market Trends Newsletter, an in-depth analysis of various financial markets of the week prior, is published every Monday. Email subscribers receive it in your inbox by Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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