Freddie Mac announced the results of its quarterly Product Transition Report Thursday.  Two quotes from  Freddie Mac  Chief Economist, Frank Nothaft sum it up:

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“Average interest rates on 30-year and 15-year fixed-rate mortgage loans fell pretty consistently through the latter half of the quarter, hitting 50-year lows in June according to Freddie Mac’s Primary Mortgage Market Survey®. The ability to lock in a principal and interest payment at below 5 percent for 30-years is rare enough. The fact that a 30-year fixed-rate mortgage can be obtained for 4.5 percent or a 15-year mortgage for 4.0 percent is an amazing opportunity for borrowers.”

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“The share of borrowers shortening their amortization terms is at its highest level in six years. In the second quarter of this year, 30 percent of borrowers who originally held a 30-year fixed rate loan refinanced into a 15- or 20-year FRM. If the borrower had a 30-year fixed rate loan at a 6.5 percent interest rate and a $200,000 principal balance, they could refinance and cut their payment by about $250 a month with a new 30-year fixed-rate loan or for about the same monthly payment as their old loan they could save some $70,000 in interest over the life of the loan with the shorter 20-year term loan.”

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www.PaulCantor.info

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Fed Open Markets Committee will reinvest in treasuries.  Good news for mortgage rates..

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Today’s FOMC meeting has adjourned with no change to key short-term interest rates. However, the post-meeting statement did give us a bit of a surprise that was quite favorable to the bond market and mortgage rates. In the statement the Fed indicated that they expect the economy to grow at a slower pace than estimated at the last FOMC meeting in late June. They renewed their “subdued” outlook for inflation, which is the key point for the bond market and the indication that they expect to keep key interest rates at their current level for an “extended period.” That leads market participants to believe that the Fed is still concerned about the economy’s ability to expand and maintain momentum.
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The surprise came from an announcement that the Fed will use funds from its holdings in mortgage bonds to buy more government debt. What this means is that the Fed is taking its interest payments and reinvesting them int o the economic recovery. This will be a much smaller campaign than we saw from them last year and early this year, but it is still considered good news. The goal is to help keep long-term interest rates low, such as home mortgage rates and corporate bond rates, in an effort to spur more spending and economic activity. The general consensus is that the impact this will have on the economy is minimal, but it does show that the Fed is attentive to current conditions and is ready to take more measures if needed..
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The financial markets have rallied after the announcement was made, particularly bonds. The stock markets erased a good part of their earlier losses, while the bond market extended its morning gains.

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Read: More  Economy needs more help, Fed says MarketWatch First Take – MarketWatch.

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www.PaulCantor.info

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Treasuries and mortgage rallied Friday on yet another weaker than expected employment report for July; job gains were less than expected and lower revisions in June non-farm jobs pushed the bellwether 10 yr note to new lows at 2.82%, previous to Friday’s decline the 10 yr had built strong resistance at 2.88%. This morning the stock indexes are better thus pressuring the rate markets. At 9:00 the 10 yr note -3/32 at 2.83% and mortgage prices off 1/32 (.03 bp). There are no economic releases today to think about. At 9:30 the DJIA opened +30, 10 yr note -4/32 2.83% +1 BP and mortgage prices -1/32 (.03 bp).

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Tomorrow Treasury begins its quarterly refunding with $34B of 3 yr notes auctioned at 1:00. Of more interest tomorrow, the FOMC meeting will conclude with its so-called policy statement at 2:15 pm. The statement is always very short and usually has nothing new; the statement will likely re-iterate for the umpteenth time that the Fed will keep rates low for an extended period, that the economy is slowly recovering, that consumers are still consolidating, and that unemployment and the housing sector are keeping consumer spending from increasing much.

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The key economic data this week doesn’t hit until Thursday and Friday with weekly claims, July retail sales, July CPI and the mid-month U. of Michigan consumer sentiment index. Treasury will conduct auctions on Tuesday, Wednesday and Thursday, borrowing another $74B from taxpayers to fund the expanding federal budget deficits brought on by failed stimulus, bailing out the big banks and falling tax revenues. Meanwhile in Washington politicians from both sides of the aisle are giving themselves raises and while no tax increases are likely until after the Nov elections, the tax increase talks are picking up momentum.

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This Week’s Economic Calendar;

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Tuesday;

8:30 am Q2 productivity (+0.1%)

Q2 unit labor costs (+1.4%)

10:00 June wholesale inventories (+0.4%)

1:00 pm $34B 3 yr note auction

2:15 pm  FOMC policy statement

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Wednesday;

7:00 am MBA mortgage applications

8:30 am June trade deficit (-$42.5B)

1:00 pm $24B 10 yr note auction

2:00 pm July Treasury budget deficit (-$169B)

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Thursday;

8:30 am weekly jobless claims (-14K to 465K)

1:00 pm $16B 30 yr bond auction

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Friday;

8:30 am July retail sales (+0.5%; ex auto sales +0.2%)

July CPI (+0.2%; ex food and energy +0.1%)

9:55 am U. of Michigan consumer sentiment index (70.0 frm 67.8)

10:00 am June business inventories (+0.2%)

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So far this morning the rate markets are managing to hold Friday’s gains with the stock market hanging around unchanged.  The coming Treasury auctions will likely keep rates in a narrow and relatively unchanged area as long as equity markets keep focused on the weak economic outlook. That however is where the rubber meets the road; the equity markets remain convinced all is right and consumers don’t matter as much in this recovery. Amazing how the spinsters can paint a picture any way convenient.

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According to a an article at the Drudge Report the Obama administration is about to make an executive order, that will direct Fannie Mae and Freddie Mac to forgive debt on loans that have balances over the value of the homes securing the mortgages.  They are also reportedly going to ask the GSE’s to ease underwriting guidelines.  This may open the floodgates for refinances.  According to experts this would be a last ditch effort to influence elections as it would be hard for the administration to get anything passed though both houses of congress before the November congressional elections.

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www.PaulCantor.info

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US GDP @ 2.4%

Jul 31, 2010

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4.54%, that is the average 30 year fixed rate mortgage for the week ending July 22, 2010, according to Freddie Mac.  This rate is down slightly (down 0.2%) from the previous week,   the average 15 Year rate for the week ending July 22 was 4.03%.  This makes it the sixth consecutive week of historic low fixed mortgage rates.

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The millions dollar question is how long week will keep seeing these record low rates.

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A recent survey shows a slow recovery, meaning short term interest rates will remain low.

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The  AP Economy Survey projects weaker growth in the coming months as key components of the economy – employment and consumer spending – continue to struggle. (July 29)

Watch the video.

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While this probably means rats for adjustable rate mortgages (ARMs) will remain low for a while the impact in fixed rate mortgages is unknown.  Some foreign economies appear to be rebounding faster the the US economy, which may mean rates on 15, 20 and 30 year fixed home loans may inch up.  Advise here is to go ahead and take advantage of the current low mortgage rates.

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www.paulcantor.info

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Mortgage Rate Recap

Jul 19, 2010

Last week; a good one for mortgage rates.. Mortgage rates fell about 8 basis points. TheDJIA -101, gold -$17.00, crude oil -$0.32. Not so good for the economic outlook. The NY Empire State and the Philadelphia Fed business index, both weaker than forecasts; and the U. of Michigan consumer sentiment index plunged to 66.5 frm 76.0 well below estimates. Consumers still are not confident about the economic outlook

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This week may be interesting for the bond market and mortgage rates. Only three major economic reports are scheduled.  Two days of semi-annual congressional testimony by Fed Chairman Bernanke. The first day of testimony has the potential to influence changes to mortgage rates more than many of the monthly or quarterly pieces of economic data that we see regularly.

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The first economic report of the week comes Tuesday morning with the release of June’s Housing Starts. This data gives us an indication of housing sector strength, but is not considered to be of high importance. Analysts are currently expecting to see a decline in new home construction starts. However, this data most likely will not have much of an impact on mortgage rates Tuesday unless it varies greatly from forecasts.

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Fed Chairman Bernanke will speak before the Senate Banking Committee Wednesday and the House Financial Services Committee Thursday mornings at 10:00am ET. His testimony will be broadcast and watched very closely. Analysts and traders will be looking for the status of the economy and his expectations of future growth, particularly inflation concerns that will lead to changes in key short-term interest rates. This should create a great deal of volatility in the markets during the prepared testimony and the question and answer session that follows. If he indicates that inflation may become a point of concern, we will likely see the bond market fall and mortgage rates rise.

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Mortgage rates drop to new low of 4.57 percent | Richmond Times-Dispatch.

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