It’s been my goal to keep everyone reading our blog updated each week with what’s happening in the mortgage industry.  This post is a bit later in the week than I’d like, but it will allow me to summarize what’s taken place over the last several days.   Mortgage rates have risen as the week has gone by with “par” rates now hovering between 4.875% and 5% for 30 Year Fixed loans.   So why did they rise?

The rate increases really got going on Wednesday, when the FOMC (Federal Open Market Committe) of the Federal Reserve Board January 28th meeting minutes came out.   In those meeting minutes there was NO mention of continuation of the purchasing of Mortgage Backed Securities which is set to end on March 31st.  That was pretty much expected, but if the possibility of continuation was expressed mortgage rates would likely have dropped.   What’s important to note is that those purchases by the Fed have accounted for approximately 80% of the marketplace over the past year.  Once you remove that artifical market from the table, volatility is bound to follow.  The minutes also included a re-affirmation of their previous guidance that GDP (Gross Domestic Product) will continue to grow and we won’t have a double dip recession.  Positive economic growth and inflation always tend to push mortgage rates higher.

On Thursday we started the day with higher than expected initial and continuing unemployment figures.  Which would normally be good for mortgage rates, although PPI (Producer Price Index), which is a key measure of inflation, increased by 3 times from the December readings and was much higher than the market estimated.  This show of economic growth was considered more important than the jobless claims and continued to push mortgage rates even higher on Thursday.  

So those two days of rate increases left us starting Friday with some of the worst rates/prices we’ve seen in the last several weeks.  The good news is Friday has been fairly positive so far with CPI (Consumer Price Index) figures at expected levels.  So while we haven’t seen much improvement in rates from Thursday we haven’t seen continued increases. 

Rates are still hovering around an average of 5% for 3o Year Fixed loans, which is historically low.  While we have seen some increases this week we still do not have the volatility expected after March and the likely higher rates that will ensue as the market for Mortgage Backed Securities is dominated by investors rather than the Fed. 

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com