Chaotic Week Leads to Lower RatesAug 15 2011
A truly chaotic time for financial markets, last week managed to keep everyone involved in the industry on their toes as stock markets around the world went up and down. While the anxiety of a weak U.S. economy continued to drive mortgage rates down, Europe added France to the list of troubled countries that are heading toward financial crises, which already includes Spain and Italy.
Yet, the US Federal Reserve released its policy announcement, promising to keep rates low for the next two years, even in the wake of the S&P downgrade of U.S. debt at the start of last week. So while the financial market continues to fluctuate, one thing does remain clear: downgraded U.S. Treasuries are still seen as one of the safest, most secure places to have your cash in troubled times.
And with these swirling concerns about another recession, a decrease in IP would almost certainly drive mortgage rates lower, according to the Industrial Production report. 30 year fixed rates already dropped from 4.39% to 4.32% last week, while one-year ARM dropped a solid 0.13%. As we go into this week, we should continue to look towards the U.S. economy as the primary source guiding interest rates. If we see signs of an improving economy, rates will most likely move upward, however signs of weakness could further push rates downward.