In the wonderful, mixed-up, counter-intuitive world of mortgage-backed securities, trading good news is bad and bad news is good. In a week with more bad than good news mortgage rates have established new record lows.
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With the exception of higher than expected consumer inflation reported yesterday, this week has seen one report after another suggesting that the US economy is continuing to weaken. Perhaps it was the after-effects of Hurricane Sandy or perhaps it was truly indicative of economic weakness. Regardless, the market responded with a move lower in stocks and higher for bonds. Bond prices rising push consumer interest rates lower.
The rising tensions in the Middle East also bode well for mortgage rates as investor around the world flock for the safety of US government-backed investments.
Today looks to continue the trend of the week. The Industrial Production report is likely to suggest a drop in US manufacturing activity over the past month. Part of this is simply a seasonal slowdown in manufacturing but the impact of Sandy and the impending fiscal cliff are also contributing to the current environment.
The shortened holiday week next week is light on market-moving data. Monday will provide a look at existing home sales which should be ok, yet the diminishing supply of homes available for sale could produce a figure below expectations. However, Tuesday’s housing starts report should be very strong. Weekly jobless claims will be reported a day early on Wednesday, but even a shorter week will not likely improve the result which will once again feel the impact of Sandy.
All this amounts to a tremendous opportunity over the next few days to apply for a mortgage loan at record low mortgage rates. Rates could be under pressure to rise after Thanksgiving, particularly if a fiscal cliff deal emerges and Middle East tensions abate. So applying for and locking-in an interest rate before Thanksgiving could be a very good move.