October 25, 2009
October 25, 2009 by admin
Mortgage rates jumped up by .125% last week, following pressure from the stock market and rising oil prices. October has not been a friendly month to the mortgage industry, as interest rates have jumped over forty basis points this month. Yields on the ten year Treasury bond have closed in on 3.5%, closing at 3.49% on Friday. The bond market has been under pressure on two fronts over the past three weeks, sharp increases in oil prices and rising equities have worked in unison to drive interest rates on higher. To end the week, most national mortgage lenders were offering thirty year fixed rate mortgage loans at 5.375% or higher. Interest rate on fifteen year mortgage loans have also risen to the high four percent range, closing in on the key five percent level for the first time since June.
Last week, the stock market enjoyed a roller coaster ride as it surpassed the 10,000 point level and then lost this mark on Friday. Economic reports for the week have sent mixed messages to the market. Friday, a key housing report was released (existing home sales) which showed that for the month of September, existing home sales rose by nearly nine percent, the largest increase in the past twelve months. This report did little to move the equity markets, which dropped over 100 pts for the day. The market seemed to discount the news from the housing industry, believing this could be a last minute surge fueled by the end to the governments home buyers tax rebate at the end of November. The belief that the home buying tax rebate may not be extended, helped to push first time home buyers into the market to lock in their rebates and great interest rates. The housing market is likely to have another strong month in October and into early November, but their remains little optimism a rally can last beyond that point without additional government assistance. The equity markets may finally be acknowledging that the housing market is being propped up on multiple fronts by the government, through tax rebates and record mortgage rates, and the elimination of this assistance could spell a long road to recovery for this market during the current economic challenges that exist in the market.
Oil prices have started to influence the mortgage industry again. Oil remains one of the only elements that is adding inflationary pressure into the economy. Over the last three weeks, the price of a barrel of oil has jumped by over twenty percent and along the way oil, quickly passed its 2009 and jumped over $80 per barrel along the way. Oil is likely to be one of the key items the investors follow to gauge the equity and mortgage markets. Rising inflation, pushes investors to expect a higher rate of return on their investments, causing bond yields to move higher and long term rates to move up in the process. The month of October is likely to close as one of the best months in trading for the year. Homeowners who have been on the fence to refinance should consider locking in at current levels to ensure they don’t lose financial savings forced by a rising stock market.