October 4th, 2010

Mortgage rates eased last week



The ongoing trend of mixed economic signals continued into last week. The second quarter GDP reading rang in at a mild 1.7%, while mortgage rates, after weeks of nearly no movement, managed a small decline:

Increasing speculation that the Fed will initiate substantial purchases of Treasury bonds (so-called “quantitative easing”) to kick-start the economy from its bare expansion helped to drive interest rates a bit lower.

HSH’s overall mortgage monitor — our weekly Fixed-Rate Mortgage Indicator (FRMI) — saw the average rate for 30-year fixed-rate mortgages shed five basis points to begin October at 4.70%. Important to first-time homebuyers and low-equity refinancers alike, 30-year FHA-backed mortgages sported an average of 4.40% [last] week. The overall average for Hybrid 5/1 ARMs declined by six basis points (.06%), finishing our national survey at 3.61%.’s FRMIs include rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so covers much of the mortgage-borrowing public.

Last week I wrote a post titled “Will we eventually recover, or is this the new normal?” There have been some subtle signs that certain economic indicators are beginning to return to “normal,” subtle indications that became clearer as the summer months came to an end:

We mention above that the economic news seems more mixed to us. It wouldn’t be hard to improve upon second quarter GDP, which came in at a final reckoning of 1.7%, but there does seem to be a mild overall uptick (or at least greater stability) in the news for September, the final month of the third quarter. There can be no doubt that 3Q10 will be a weak one overall, but to us, much of the weakness seemed to be concentrated in July and August.

While we did clearly downshift from July into August, and while we’re not exactly rocketing ahead by any means, there are some improvements to be noted in August and September readings of various indicators.

What’s in store for this week?

The big employment report [comes out later this] week, and it’s the big gorilla in a fairly empty room. Stock and bond markets enjoyed unexpectedly favorable conditions in September, which is not noted to be a historically great period for equities. October’s been known to be a difficult period, too, but if September’s any indicator, perhaps the markets are simply becoming accustomed to being in active crisis, and can find reasons to celebrate when we’re not. Here’s hoping that the rally’s got more substance behind it than that, but there’s nothing wrong with a little optimism showing somewhere.

If things are showing sporadic signs of life as we suspect, the employment report might just not be as poor as so many have been this year… and last year… and the year before that. Even minor improvements would go a long way toward mending the shattered confidence which is holding the economy back.

Mortgage rates will of course remain near record lows, and averages should remain fairly unchanged for the week.

CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “Mortgage rates ease, again.”’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox 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'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 and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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