Mortgage rates are moving again

The Little-Known Reason Why Mortgage Rates Are Rising This Week (And Why They May Go Higher Still)

Posted: 30 Jul 2009 08:00 AM PDT

After starting the week with a run lower toward 5 percent, mortgage rates have reversed course.

It started mid-day Tuesday and the culprit is Basic Economics. Here's why.

Mortgage rates are based on the price of mortgage-backed bonds and -- like most things -- mortgage-backed bonds prices are based in Supply and Demand.

When bond supplies grow faster than the corresponding demand for them, bond prices tend to fall and when bond prices are down, bond yields are up.

Meanwhile, this week, the U.S. Treasury is making its largest weekly auction in history. $115 billion in new debt, to be exact. This means that before the week is through, $115 billion in new bond supply will have been introduced into the market and -- so far -- demand hasn't kept pace with the new supply.

Prices are plunging.

For home buyers and rate shoppers, this is especially bad news because mortgage-backed debt is less desirable to investors than is treasury debt. As a result, when treasury debt loses values, mortgage-backed debt tends to lose value, too. Not always, but most of the time.

So, beginning with Tuesday afternoon's auction, debt supplies have been growing faster than buyer demand.

Bond markets are suffering from an abundance of debt supply and it's been a big reason why mortgage rates are rising. The week's not over yet, either. $28 billion is due for auction Thursday.

If demand at the auction is similarly low, watch for mortgage rates to spike again.

How not to Lose Your Good Credit in Divorce

Don’t Lose Your Good Credit in Divorce

by admin

Divorces are going up and credit ratings are going down. Good credit is one asset you must diligently protect during divorce. You’ll lose your good credit if your spouse runs up huge bills on your charge accounts and credit cards. It’s difficult to financially cope during the turmoil and expense of divorce, but three timely steps can protect you from losing your good credit.

First, immediately notify your creditors that you will no longer be responsible for your spouse’s debt. Secondly, destroy and revoke all credit cards on which you have liability. Don’t assume you’re not responsible for your spouse’s credit card debts. You probably guaranteed these credit obligations. Finally, publicly disclaim all liability responsibility for your spouse’s future debts. Most states consider public notice sufficient to inform third parties that you reject liability for future debts incurred by a spouse. Check your state laws. Also, accept your own credit responsibilities. If you can’t punctually meet your obligations during your divorce, tell your creditors before you default. Let your creditors know the reason for your financial problems, but make small, timely installment payments to show good faith. Most importantly, request that your creditors not to report your defaults to the credit bureau.

This week in Mortgage Rates June 22 2009

Mortgage markets finished out the week unchanged last week but that's not to say that mortgage rates stayed flat.

From day-to-day, mortgage rate shoppers were on a veritable roller coaster.

* Monday and Tuesday, rates dipped
* Wednesday and Thursday, rates surged
* Friday, rates retreated

Overall, conforming mortgage rates carved out a half-percent range this week. This caused fit for home buyers in need of a rate lock, and homeowners interested in refinancing.

Rates changed quite a bit from day-to-day, and even from hour-to-hour at times.

This is the same brand of mortgage rate volatility we've seen all year and it's expected to continue through at least this week, too. There are a number of market-moving events set to hit.

The event with the largest potential impact is the Federal Open Market Committee's two-day meeting.

Scheduled for Tuesday and Wednesday, the Bernanke-led Fed is not expected to raise the Fed Funds Rate upon its adjournment but the markets are more interested in what the Fed says than what it actually does.

If the Federal Reserve says that long-term inflation is a concern, mortgage rates should rise because inflation often leads rates higher. Similarly, if the Fed says the economy is recovering quicker than expected, mortgage rates should rise on that story.

The Fed adjourns at 2:15 PM Wednesday so watch for big market swings around that time.

In addition, there's some big data points due out this week including the Existing Home Sales and New Home Sales reports, plus the Personal Spending and Consumer Sentiment survey.

Each of these reveals the psychology of the U.S. consumer and consumers with dollars to spend move the economy forward. If the reports are overwhelmingly positive, mortgage rates should rise as a result. On the other hand, if the data is weak or non-convincing, mortgage rates should ease.