20071013 - Quick n Dirty - Rates Increase

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30 yr - 6.40% w/ 0.4% in fees. UP from 6.37%. 1 yr ago - 6.37%
15 yr – 6.06% w/ 0.5% in fees. UP from 6.03%. 1 yr ago – 6.06%
5/1 ARM – 6.12% w/ 0.5% in fees. UP from 6.11%. 1 yr ago – 6.11%
1 yr ARM - 5.73% w/ 0.6% in fees. UP fom 5.58%. 1 yr ago – 5.56%
(Average mortgage rates according to Freddie Mac’s Primary Mortgage Market Survey®, as of 10-11-07)

Note: These rates should be used for trend line analysis only, NOT for comparison shopping. Your rate will vary depending on multiple factors. In general, this simply helps demonstrate which direction mortgage rates have moved from week to week.

Summary: Mortgage rates often move following the release of the impactful employment report every month. For September, the economy added 110,000 new jobs while July and August were revised upwards by a total of 188,000 jobs. This greater strength in the economy tends to lead to inflation.

As long time readers should know off the top of their heads; inflation, or concerns about future inflation, cause bond investors to demand higher yields (interest rates). Mortgages are packaged together in the form of bonds and sold on Wall Street. Anything that impacts bonds, usually impacts mortgage rates. When bond yields rise, mortgage rates typically follow. In VERY general terms, while certainly not always the case, when there is good news reported about the economy, mortgage rates tend to go up, and vice versa.

Overall, since The Fed lowered short-term interest rates ½ percent on September 18th, mortgage rates have INCREASED about 1/10th of a percent across the board. “But how can this Jimmy?” I can only reply with what I have been saying for years: “It’s not what the Fed does, it’s what they say”…Well, sort of, sometimes actions speak louder than words.

When the Fed lowered rates, they basically said they didn’t care about inflation and the continued decline of the value of the dollar. Now, there is much more to it of course, but the bottom line is that the lowering of short-term rates was an inflationary move and as I just stated above, this tends to raise mortgage rates.

I've been working on some big projects, thus the limited reports and podcasts. We'll get it crankin' back up soon. Meanwhile, enjoy the autumn season!

Thought of the Week: "People with clear, written goals, accomplish far more in a shorter period of time than people without them could ever imagine." -- Brian Tracy, Author