Amid a dearth of new U.S. economic data, Eurozone developments led mortgage markets down in last week’s holiday-shortened trading week. Mortgage rates worsened slightly, increasing week-over-week for the first time in a month.
Freddie Mac reports the average 30-year fixed rate mortgage at 3.99% with an accompanying 0.7 discount points. Discount points are loan fees, and 1 discount point is equal to 1 percent of your loan size.
Greece has dominated mortgage market headlines since February. As the nation-state aims to reign in its national spending, it has also adopted harsh austerity measures. The combination is meant to prevent future debt defaults, but global investors remain concerned that problems in Greece may spill over into other Eurozone nations.
As those concerns have grown, U.S. mortgage markets have benefited. This is because U.S. mortgage markets are backed by the U.S. government, and investors treat the U.S. mortgage market as “safe” compared to other security-types.
Safe investments are in high demand during uncertain times, often improving in price. This pattern is known as Safe Haven Buying and it’s one reason why mortgage rates tend to fall when the economy is sagging. Mortgage rates move opposite of mortgage bond prices.
This week, U.S. economic data returns, but markets will still be watching the Eurozone. Sunday, Italy changed leadership, in part, to restore market confidence in its ability to get its debt load under control.
Expect developments in Italy to sway U.S. mortgage rates this week. In addition, rates will respond to a rash of economic data and Fed speakers :
- Tuesday : Producer Price Index, Retail Sales, 5 Fed speakers
- Wednesday : Consumer Price Index, Housing Price Index, 2 Fed speakers
- Thursday : Housing Starts, Jobless Claims, 1 Fed speaker
Mortgage rates remain near all-time lows, with not much room to drop. If you’re shopping for a mortgage rates, therefore, consider locking in. As Greece and Italy show signs of moving forward, expect Safe Haven Buying to recede, and mortgage rates to rise.