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Mortgage Markets In Review : December 22, 2008


Mortgage markets improved last week for the second week in row. After the Federal Reserve said it would use “all available tools” to stimulate the economy, traders responded by driving mortgage rates to 50-year lows.

It didn’t last long, however.

After bottoming out early-Wednesday morning, mortgage rates trended higher all the way into Friday’s closing. It was the third time in 2008 that a sharp mortgage rate drop lasted less than one full day of trading.

Many Americans took advantage of the historically-low mortgage rates, locking in new home loans below 5 percent. And, in general, these homeowners shared 4 characteristics:

  • Credit scores of at least 720
  • At least 20 percent equity
  • Relatively low debt versus household income
  • Ongoing relationship with a loan officer

Now, the first 3 bullet points are easy-to-understand but it’s the fourth one that really mattered — it’s the trait that got people “real-time access” to low rates the moment they published.

After all, it wasn’t until Thursday morning that the press ran its stories about “4.5 percent mortgage rates” and, by that time, mortgage rates had already retreated — by as much as a full percentage point in some cases. Thursday morning’s news was a half-day too late.

Still, mortgage rates do remain low.

This week is trade-shortened and thick with data. In addition to two pieces of housing news and a consumer sentiment survey, we’ll get a look at the Federal Reserve’s preferred Cost of Living index. All four data points are expected to validate the recession, so don’t expect mortgage rates to move much.

Instead, the biggest threat to mortgage rates this week is momentum. If mortgage rates tick higher Monday and Tuesday, expect that to continue Wednesday into the 2:00 P.M. market close and then to resume again Friday.

Markets are closed Thursday for the federal holiday.

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