Last week was a busy economic news week. In short, mortgage rates had a good week.

Did you ever read ‘Choose Your Own Adventure‘ books in school growing up? Okay, two ways to proceed with this weekly mortgage update. Only because I love to talk about the market, I often talk a lot about the ‘Why’ behind the market. Some readers only want to know the ‘What’. Make sense? Read on…

1. If you want to read the ‘Why’ behind last week’s mortgage market, start reading immediately below.
2. If you just want to know the ‘What’, start reading at the header “What’s All This Have To Do With Mortgage Rates?”

The big news last week (in case you haven’t read any news since last Wednesday), was the Fed decided to leave the Fed Funds Rates (FFR) unchanged. The Fed’s lack of movement caused the stock market to go a little crazy. To be fair to the Fed, they were in a pretty rough position.

• The economy is a little slow.
• The housing market is trying to slowly recover (mainly in hardly hit markets).
• Consumer confidence is still showing low results.
• Food and energy costs seem to keep increasing.

Thus, is why I think the Fed was in between a rock and a hard place. The vote for keeping the FFR unchanged was 9-1. So, it wasn’t unanimous – but it wasn’t a knock down drag out fight either.

Inflation continues to be a concern. The Fed started easing back in September to kick start us out of a recession and continued to do so seven times. As the Fed cut, the value of the US dollar has quickly deteriorated against the Euro. Since oil prices are in US Dollars, it’s caused oil prices to rise. Even though oil consumption is down, the declining value of the dollar has oil prices at all time highs over $140/barrel. Insane.

Getting to My Point..
The Fed sees that we’re in a rough position. Inflation is a concern of theirs, but they also don’t want to cause a sell-off in the stock market. I think the Fed will be hiking the FFR in the coming months to fight against inflation. In the meantime, everyone will be extremely tuned in to what the Fed says about inflation in their upcoming conferences, public appearances, etc.

The Fed’s next meeting is in August. So stay tuned.

What’s All Have To Do With Mortgage Rates?

Ok, now that you know the ‘Why’ behind the market, here’s the effects. Due to some not so sexy news from UPS , a price increase from Dow Chemical since the costs of energy are headed up and a weak Consumer Sentiment…money flew from stocks (leaving a rough stock market) and into bonds. Honestly, the small improvement in mortgage rates last week was mainly due to such a weak stock market. Not so much the Fed’s statement and decision to stay unchanged.

The Pitch
If you’re shopping for a mortgage (purchase or refinance), it’s important to know what impacts mortgage rates. If you lock ahead of a great improvement, you can loose out on $1000’s worth of savings. Same goes for if you ‘wait it out’ and don’t lock ahead of a wicked reprice.

Getting a great deal on a mortgage isn’t all about asking the common questions:

1. What is your rate?
2. What are your closing costs

Look for great advice. If you’re in Iowa, I’d be glad to be your guy. If you’re out of the state, I’d be happy to connect you with someone who can get you the advice you need!

Follow at Your Own Risk
If you want to keep updated on where rates are moving day to day, feel free to follow me on Twitter. It’s a bit of an addiction for me, but I communicate what the market’s doing throughout the day and try to take some of the mystery out of where mortgage rates are headed.

Market Information Provided By MORTGAGE MARKET GUiDE

Tagged as: Bernanke, Choose Your Own Adventure, Fed Fund Rate, FFR