Interest Rates Rise On Quiet Week

September 10th, 2010

A quiet week in economic news with the Labor Day holiday saw interest rates rise. Mortgage calculators saw more activity for new home loans than refinance mortgages. Here is the latest mortgage and economic news for the week that impacts mortgage rates and the housing industry.

Economic news

The only major economic data appearing this week was the Labor Department release of new unemployment claims on Thursday. Interest rates rose on the release of the data showing 451,000 new claims for unemployment insurance being filed. While a very high number it was down from the prior week’s release and below the consensus number of 470,000 new claims.

While the data caused a drop in bond prices, and therefore an increase in rates, and a jump in stock prices, the data is not wholly accurate. In the release the Labor Department indicated the number of claims were an estimate as nine states, including California, did not have accurate counts due to the Labor Day holiday. For those states either the states themselves or the Labor Department provided estimates for the number of claims filed.

Further clouding the unemployment claims release was a revision upward of total claims for the prior week. With the sell-off of mortgage bonds and a very lackluster reception for a Treasury auction of 30-year Treasury bonds investors seemed to signal that perhaps the security markets were overpriced and due for a correction. There is a new refinance calculator in the works.

Freddie Mac rate inches higher

For the first time since the week of June 17 Freddie Mac reports in its Weekly Primary Mortgage Market Survey that the average 30-year fixed rate has increased. In its report yesterday for the week ending Sept. 9 the average rate at a cost of 0.7 origination points was 4.35 percent, up 3 basis points from the week before.

What does this mean if you are using a refinance calculator? Not that much, the difference in the monthly payment on a $200,000 30-year fixed rate mortgage from 4.32 percent to 4.35 percent is only $3.53 per month. Of potential greater significance is the increase in the rate for the first time in almost two months. Is it the first increase of many or merely a temporary market fluctuation?

Prequalification calculators transition to mortgage applications

Purchase applications for the week ending Sept. 3 were up 6.3 percent from the prior week and reached their highest volume since the end of May according to the Weekly Application Survey released by the Mortgage Bankers Association. With refinance applications dropping 3.1 percent for the week total mortgage applications for the week fell 1.5 percent, the reason being that refinance applications still consist of almost 82 percent of total application volume in the country.

A slow first full week of September for economic data, but certainly not for mortgage rates as they increased for the first time in two months. Showing positive signs for the housing industry, increased purchase mortgage applications could bode well for the fall if the activity continues. This benefits those looking to purchase new homes as it provides sellers incentive to market their homes more aggressively and for those looking to refinance as increased sales activity supports stable housing prices.

Our outlook for continued low rates does not change with the small increase in rates this week. Next week there is plenty of economic data being released that will provide a much better gauge of the economy in August and thus far in September than the data released this week.

Use this information and the free on-line mortgage calculators to make your mortgage and home finance decisions.

Posted By :
Dennis C. Smith is co-owner and broker of record for Stratis Financial in southern California. He has over twenty years' experience in the mortgage industry.

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