Mortgage markets lost a little bit of ground last week, edging mortgage rates higher in a week marked by the largest stock market gains since November.
Once again, mortgage rates couldn’t sustain a rally of more than 5 days. Not since late-2008 have mortgage rates managed to fall two weeks in a row.
Last week’s market was impacted by three distinct factors:
- Bank balance sheets weren’t as bad as feared
- Discussion started on new bank valuation methods
- Traders got optimistic that “the worst is over”
The rally will likely continue into this week, too. This after the 60 Minutes interview with Ben Bernanke in which the Fed Chief said he won’t let big banks fail and that the recovery will likely begin later this year.
It’s the first interview with a sitting Federal Reserve Chairman in history.
Coincidentally, the Federal Reserve will be in the spotlight this week as it concludes a two-day meeting Wednesday after which the Fed will issue its standard, post-meeting press release at 2:15 P.M. Although it’s not expected to make Fed Funds Rate changes, the markets will closely watch the Fed’s language for clues about the next phase of monetary policy.
In general, when the Fed indicates that inflationary pressures may build, mortgage rates rise. Moreover, in the above interview, Bernanke alluded to such inflation and the need to control it in the future.
Despite the small rise in rates last week, mortgage rates remain low and favorable for high-credit scoring borrowers. Volatility is still a factor, however, so if you’re nervous about rates rising, it may be best to lock early in the week — before the Fed’s Wednesday announcement.
