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This week will be very important for mortgage rates despite the fact that it is a holiday shortened week. There are four relevant factual economic reports scheduled for release along with the minutes from the last FOMC meeting. This means that we may see fairly significant changes to rates more than one day this week.

Tomorrow morning brings us the rel ease of November's Existing Home Sales report, which comes from the National Association of Realtors. It gives us a measurement of housing sector strength and mortgage credit demand, but is not considered to be of high importance to bonds or mortgage rates. However, after the surprisingly large drop in November's New Home Sales report, we could see this data also influence mortgage rates if it shows similar results.

The financial markets will close early tomorrow and remain closed Tuesday in observance of the New Year's Day holiday. They will reopen Wednesday morning with the release of the Institute for Supply Management (ISM) manufacturing index. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. Analysts are currently expecting to see a 50.5 reading in this month's release, meaning that sentiment fell sli ghtly from November's 50.8. A smaller reading will be good news for the bond market and mortgage shoppers while a higher than expected reading could lead to higher mortgage rates Wednesday morning.

Also Wednesday will be the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed's thinking and concerns regarding inflation and monetary policy. It may also help form opinions of the Fed's future moves toward interest rates. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they shouldn't affect the markets or mortgage rates until afternoon hours.

The Commerce Department will post November's Factory Orders data late Thursday morning, giving us an important measurement of manufacturing sector strength. This report is similar to the Durable Goods Orders releas e that was posted late last month, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see an increase of 1.0% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a small change in rates.

The final report of the week comes Friday morning when the Labor Department will post December's employment figures. The Employment report is considered to be one of the most important monthly releases we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a smaller than expected increase in new payrolls and a small increase or even a decrease in earnings would be good news for the bond market.

Current forecasts call for a 0.1% increase in the unemployment rate, pushing it to 4.8%. Analysts are expecting to see an increase in new payrolls in the neighborhood of 70,000 with earnings rising 0.3%. If we see much fewer than 70,000 new jobs, we should see mortgage rates drop considerably Friday. However, stronger than expected readings will likely push mortgage rates higher.

Overall, the key data of the week will be Wednesday's ISM index and Friday's Employment report, which could set the tone for the bond market and mortgage pricing for the next few weeks. If they show weaker than expected results, mortgage rates should move lower for the week.

If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... F loat if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Borrowers Get Year-End Gift from Fed

The Federal Reserve lowered interest rates for the third straight meeting of the FOMC. What does this mean? Well, if you're looking to capture the best home loan rates, you need to act now. For those with an application already in process, you should probably lock your rate as soon as possible. And, for anyone who has yet to begin a loan application, what are you waiting for?

Rate Hikes on the Horizon
Despite this latest cut from the Fed, rates for many borrowers could actually increase soon. Why? Because Fannie Mae and Freddie Mac have recently announced 2008 Loan Level Price Adjustments (LLPAs) that are already starting to show up on lenders' rate sheets. LLPAs are automatic “penalties” based on credit scores, which tack on costs in the form of points or higher rates for most anyone with a FICO less than 720. Call me, and I will give you all the details.

Back to The Fed
But, let's get back to the good news. The Fed cut the Federal Funds Rate, an overnight lending rate that banks charge each other and which influences the amount of interest consumers pay for various types of debt, such as credit cards, home equity lines of credit, and auto loans.

Since September 18th, the Federal Funds Rate has gone down 100 basis points. If you have a loan that is tied to the Prime Rate, this means your rates have been lowered a full point. But, for those seeking to obtain new financing, you must act now to take advantage.

No Time to Wait
Following each of the last two interest rate cuts by the Fed, home loan rates jumped higher a couple of weeks later. Remember, lower short-term rates are inflationary by nature, and cause consumers to spend more money. Because of this, long-term rates tend to increase as bond holders hate inflation and command higher rates as a result in order to protect their investments.

Because of these pressures and the upcoming Loan Level Price Adjustments, interest rates are going to rise. You need to call me now in order to secure the best deal you may see for some time. You'll be glad that you did.

We appreciate your business and wish you a happy and healthy holiday season!

Weekly Rate Lock Advisory 

There are five pieces of economic news that may affect mortgage rates this week. All of the relevant news will be released over three days. I expect the stock markets to again be a fairly significant influence on bonds the other days. If we see sizable stock losses, funds may shift into bonds and lead to lower rates. However, stock gains could push bond prices lower and mortgage rates higher those days.

November's manufacturing index from the Institute for Supply Management (ISM) will kick off the week's data at 10:00 AM ET tomorrow. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. Current forecasts call for a small decline in sentiment from October to November. October's reading was previously announced as 50.9. A weaker reading than the expected 50.5 would be good news for the bond market and mortgage rates. This release will be watched closely because recent declines have brought it very close to the important benchmark of 50.0. A reading above 50 means that more surveyed trade executives felt business improved than those who felt it had worsened. A drop below 50 indicates that more felt business had worsened. That is a recessionary sign and could lead to a sizable rally in bonds and mortgage pricing.

The next piece of data that we need to be concerned with comes Wednesday morning with the release of the revised 3rd Quarter Productivity report. This index is expected to show an upward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn't necessarily bad for the bond market. It is the conditions around economic growth, such as inflation that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 5.5%, up from the previous estimate of 4.9%.

The second report of the day is October's Factory Orders. This report is similar to last week's Durable Goods Orders release except that this one includes orders for both durable and non-durable goods. This data usually isn't a major influence on bond trading, but we may see it cause some movement in mortgage rates if it varies greatly from forec asts. Analysts are expecting to see an increase of approximately 0.4%.

Friday also brings us the release of two reports, one of which is arguably the most important monthly report we see. The Labor Department will post November's Employment report early Friday morning. The report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for a slight upward change in the unemployment rate to 4.8%, new payrolls up approximately 75,000 and an increase of 0.3% in average earnings. An ideal scenario for mortgage shoppers would be a higher unemployment rate than 4.8%, a much smaller increase in jobs than is expected and no change in the earnings portion.

The fifth and final report of the week is December's preliminary reading to the University of Michigan's Index of Consumer Sentiment Friday morning. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly. However, with the employment figures out before this data, I don't expect it to affect mortgage rates much. It is expected to show a reading of 75.5, which would be a small decline from last month's final reading.

Overall, the most important day of the week is Friday with the employment figures being released, but we may also see movement in rates Monday and Wednesday. The remaining days could be fairly quiet, depending on stock market gains or losses. Friday's data could cause a significant change in rates, but if it reveals stronger than expected results we may see rates spike higher Friday morning. Ahead of the report, we may see pressure in bonds as investors prepare for its release. Accordingly, I am holding the lock recommendations for short and intermediate-term periods.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.