What's Ahead For Mortgage Rates This Week : January 18, 2011

Mortgage markets worsened last week on a turn-around in sentiment across the Eurozone. The sort of "safe haven" buying that had buoyed mortgage bonds since the New Year dissipated, and mortgage rates resumed climbing.

Last week marked the first week since the end of 2010 that mortgage rates have risen, breaking a 2-and-a-half-week rally.

Conforming and FHA mortgages in North Carolina increased in rate by roughly 1/8 percent.

Last week was data-sparse so mortgage markets took their cues from Europe -- specifically Portugal and Spain. There have been lingering concerns that the two countries might default on their respective national debts. The development has a similar feel to what transpired in Greece in April of last year, and that may be why markets are reacting in much the same manner.

At the beginning the year, the fear of default in Portugal and Spain was elevated. It drove money managers away from risky assets and toward safer ones, including U.S. mortgage bonds. Last week, however, those fears eased. Money reversed flow and, as a result, mortgage rates rose. 

Truly, this is a global market.

This week, the Eurozone story continues, but there is a lot of U.S. housing data due for release, too.

• Tuesday : National Association of Homebuilders Housing Market Index
• Wednesday : Building Permits, Housing Starts
• Thursday : Existing Home Sales

Housing is considered key to the country's economic recovery, so strength in this week's housing should lead stock markets higher on better expectation for the economy which would, in turn, cause a sell-off in mortgage bonds, driving mortgage rates higher.

Mortgage rates are decidedly higher than their lows of 2010, but have much more room to rise. If you haven't locked your mortgage rate yet, consider taking care of it this week.

Rates have farther to rise than to fall in the medium-term.

What's Ahead For Mortgage Rates This Week : January 10, 2011

Mortgage markets gained last week as a combination of safe-haven buying and an improving economic outlook attracted new buyers. Demand for mortgage-backed bonds outweighed supply and conforming and FHA mortgage rates edged lower.

Last week marked the second straight week that mortgage rates fell in and around North Carolina. Rates had risen over the previous 7 weeks.

According to Freddie Mac's weekly mortgage rate survey, the national average rate for a 30-year fixed rate mortgage is 4.77 percent with an accompanying 0.8 points required.

This week, with no new data due for release, look for last week's two biggest stories -- jobs and debt -- to carry forward. The first such story relates to jobs.

Friday, the Bureau of Labor Statistics released its monthly Non-Farm Payrolls report. Consensus estimates were for 150,000 net new jobs created December, with "whisper numbers" pegging the number as high as 250,000. Mortgage rates increased on the chance that the rumors were right. 

It turned out, they were not.

Accounting for revisions to past months' data, December's jobs data was in-line with expectations, resulting in a mortgage rate retreat that lasted all day Friday. That momentum should carry forward into the early part of this week.

The second story is tied to safe-haven buying.

The U.S. mortgage market benefited from growing concerns within the Eurozone that Portugal could default on its debt. The story emerged three weeks ago when Portugal's debt was downgraded. It picked up steam last week after a weak debt offering. It's a similar beginning to what transpired in Greece last spring.

Mindful of their respective risk, worldwide investors chose to shift risk toward safer asset classes which includes, of couse, mortgage-backed bonds. This week, those risks will remain and the flight to quality assets should continue. Mortgage rates will benefit.

Given the likelihood that mortgage rates will fall this week, it may be tempting to let your mortgage rate float. That strategy could prove foolish.

Mortgage rates fell to historic lows in 2010 and sprung higher at the first possible opportunity. Rates remain at ultra-low levels and have lots of room to rise. This week, consider buying on the dip. It may be the last chance you get.