Weekly Mortgage Newsletter

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Week of July 31, 2011 Mortgage Market Commentary

Last week held a big surprise for financial markets. The first estimate of the second quarters GDP was thought to have only slowed slightly, from 1.9% to about 1.7%. Unfortunately, the US economy appears to have slowed even more than expected to 1.3%. This moved money out of stock markets, and helped nudge rates downward on Friday. This week could be a very interesting week for financial markets. While the larger-than-expected slowdown in the economy would generally pressure mortgage rates lower, whatever Washington does regarding the debt limit could push rates in any direction. Whether a debt limit extension is reached or not, the more important long term question may be what happens in the case of a downgrade to US debt. While there is no way to know for sure, since it has never happened, most experts believe a downgrade would pressure all interest rates upward, including mortgage rates. However, since it is a completely new situation, no one knows for sure how this week will play out. Mortgage Rates
30Yr 4.75% 4.25% 3.75% 3.25% 2.75%
5/5
13,000.00

This Weeks Top Economic Reports and Events

Report/Event Date Prior Est. Impact 8/1 55.3 54.0 ISM Manufacturing Index Significant After last weeks GDP, a larger-than-expected drop in this index would certainly put significant downward pressure on mortgage rates. 8/2 0.3% 0.2% PCE Prices (core) Moderate Inflationary pressures have remained very subdued, and any reading near expectations will provide some balanced pressure on mortgage rates. 8/3 53.3 53.1 ISM Services Index Moderate With expectations of a nearly unchanged reading, a jump in this index could generate some upward pressure, especially if the other ISM climbs. 8/5 9.2% 9.1% Unemployment Rate Significant If the market is pushing interest rates upward at the end of the week, and unemployment drops, rates are very likely to keep pushing higher. 8/5 18K 78K Nonfarm Payrolls Significant Jobs are the biggest key to economic recovery, and another extremely poor showing for new jobs will put downward pressure on interest rates.

15Yr

1Yr ARM

5/19

6/2

6/16

6/30

7/14

7/28

Dow Jones

12,750.00 12,500.00 12,250.00 12,000.00 11,750.00 5-May 19-May 2-Jun 16-Jun 30-Jun 14-Jul 28-Jul

9.00

Historical Rates

6.00 3.00 0.00

Jul-06 Jul-07 Jul-08 Jul-09 Jul-10

Mortgage Rate Trends

Short-Term Long-Term Volatility High

Interest Rates and Indexes

1 Yr T-Bill 10 Yr T-Note 6 Month Libor Prime Rate 0.180% 11th D. COFI 1.360% 2.970% COSI 2.240% 0.423% CODI 3.250% MTA 0.280% 0.252%

1 Yr CMT CODI

MTA Prime

COFI

10 Year Treasury Note Trend

3.50 3.25 3.00

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28-Jul

2.75
5-May 19-May 2-Jun 16-Jun 30-Jun 14-Jul

10 Year Treasury Note

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