Unfortunately for mortgage rate shoppers in Canton , markets were worse throughout the other 3 days of the week, which kept mortgage rates from dropping to new all-time lows.
As with many weeks since the start of the year, political and economic action within the Eurozone dictated the direction of domestic mortgage rates. Last week's 2-day EU Summit was the major driver of markets.
In the days leading up to the summit, mortgage rates worsened as optimism in summit's outcome grew. This is because a stable Europe is good for the world's economy which, in turn, encourages Wall Street investors to move money from "safe investments" such as U.S. mortgage bonds into more risky ones such as equities.
This creates an excess supply of mortgage bonds which causes mortgage rates to move higher.
Then, on the day prior to the summit, the optimism faded. Several Eurozone leaders expressed an unwillingness to compromise, rhetoric which drove investors back into "safe" asset classes, explaining the mid-week drop in mortgage rates.
However, Friday, in a surprise move, EU officials announced a plan to recapitalize Europe's banks and to reduce borrowing costs for Spain and Italy, once again, pushing investors back into a risk-taking mood.
The news in Europe overshadowed strong housing reports here in the United States.
New Home Sales and the Pending Home Sales Index both gave strong results and inflationary pressures were shown to be in check. The housing market continues its slow, steady recovery.
This week, mortgage rates are expected to remain volatile. The markets have had the weekend to pick through the EU agreement and, later this week, the Bureau of Labor Statistics will release the June 2012 Non-Farm Payrolls report. In addition, this is a holiday week so trading volume is expected to be lighter-than-usual.
Mortgage markets will be closed Wednesday.
