The following are excerpts from HSH Associates newsletter for the week ending June 8, 2007:
Home mortgage rates continued their weeks-long rise this week; the average 30-year fixed-rate mortgage (FRM) surged by 14 basis points (0.14%) to close the nation’s leading poll of mortgage prices at 6.65% (up almost 30 basis points (.3%) in the last month). Hybrid 5/1 ARMs followed suit, rising to 6.46%, a spurt of 15 basis points. These increases were largely due to a surprise hike in foreign interest rates.
A light economic calendar, a stock market which seems to have topped out for the moment, and a late-week selloff in the Treasury market — which pushed 10-year Treasury yields to five-year highs before falling back by week’s end — all contributed to the increase in mortgage rates, particularly this week. As has been the case over the last couple of weeks, economic news has been mixed, but flashes of stronger growth have become clearly evident. Inflation concerns are evident around the world; the European Central Bank raised rates a quarter percentage point this week, setting their key interest rate at 4%. Opportunities in other bond markets are drawing off investor dollars, adding more firmness to U.S. interest rates.
Mortgage rates took quite a hit this week, but this was due largely to the Treasury selloff caused by a surprise rate hike by New Zealand’s Reserve Bank; this spurred fears that other countries’ central banks might follow suit. Even without this scare, the general runup in rates over the past few weeks isn’t wholly unexpected given the reports of stronger economic data and a revival of economic growth from a truly anemic 0.6% in the first quarter of this year. Investors have given up on a rate cut by the Fed this year.
Fixed Rate Variable
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