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October 21st, 2013

Mortgage rates firm as government reopens

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Below is an excerpt from of our latest Market Trends newsletter, Keith Gumbinger’s weekly examination of the economic conditions that influenced mortgage rates. Sign up to receive the Market Trends in your inbox Friday evening.

Mortgage Rate ConceptAfter a couple of weeks of impasse, the Congress took a cue from the Federal Reserve and punted, finally settling on an agreement to run the government until at least mid-January and to lift the nation’s debt limit until early February.

However, this virtually guarantees that we’ll be seeing this fiscal stalemate movie again, only later this year and into early next.

Fed’s QE taper could be a ways off

Although slightly firmer for last week at a whole, at a glance, it might appear that mortgage rates have started to decline a little based upon some kind of “relief rally” that the Federal government is again open for business and a default on the nation’s debt has been averted.

Nothing could be further from the truth.

In fact, the late-week decline in mortgage rates (which can be tracked daily at HSH.com if you are so inclined) is more likely related to a single issue:

The Fed may not start a taper for a longer while yet.

Mortgage rates firmed up last week

HSH.com’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator–found that the overall average rate for a 30-year fixed-rate mortgage (conforming, non-conforming and jumbos) rose by three basis points (0.03 percent) to 4.45 percent.

The overall average rate for a 15-year fixed-rate mortgage (conforming, non-conforming and jumbos) increased by only two basis points (0.02 percent) from the previous week’s figure, firming to 3.57 percent.

With the FHA coming back on line, the popular FHA-backed 30-year fixed-rate mortgages bucked the upward trend, posting a decline of five basis points to land at 4.02 percent.

The overall 5/1 Hybrid ARM followed suit with a three hundredths of a percentage point decline (0.03 percent), drifting down to 3.15 percent for the week.

This week…

This week is fairly packed with economic data. The September employment report is eagerly awaited, if more backward-looking than usual. Sales of new and existing homes for September will probably finally show the full effect of the summer mortgage-rate rise, we’ll get a look at leading economic indicators, consumer moods, more regional manufacturing surveys, the Chicago Fed’s National Activity Index and more. It will be a busy week for the markets, to be sure.

Mortgage rates should start the week on a downward note, based upon how last week came to a close. The tide of data will probably continue to show more of the “modest to moderate” the Beige Book found, but before the Fed inaction and certainly before the congressional interruption took center stage, we recall that the data had a slightly warmer-than-not tenor to it, collectively.

Should that continue, it would tend to slow any fall in rates, but we still think there’s a good change of an 8 to10 basis point decline in HSH.com’s Fixed-Rate Mortgage Indicator by the close of business next Friday.

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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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