Factors Influencing Mortgage Rates

Rates moved lower at the end of this week as traders were pleasantly surprised by foreign participation in Thursday’s Treasury Auction. It used to be the economic reports were the most
dominant factor impacting the direction of mortgage rates. However, this has changed in the past few months with a tremendous increase in the size of government auctions of Treasury Bonds. This added supply weighs on all bonds which includes mortgage bonds and causes interest rates to rise. While this week’s Treasury Auction went well and rates went down, there is another huge Auction scheduled for August 11,12, 13th. The size of this auction will be announced on August 5th and will likely cause volatility for mortgage rates as a result.

Another factor influencing rates this week was the announcement of the GDP numbers which fell 1% last quarter. This is the fourth straight quarter that GDP has fallen, which is the first time this has occurred since the government began keeping records in 1947.

Finally, consumer spending, which accounts for two thirds of the US economic activity, dropped by 1.2% in the 2nd quarter after it had improved by .6% the previous quarter.

All of this data is good news for home buyers as rates remain historically low.

~ Courtesy of Wendy Charles, LoanCentral LLC, WendyC@LoanCentral.com, 425.468.9321