Market Comment
Mortgage bond prices fell last week pushing mortgage interest rates higher. The Treasury auctions were mixed with the 3 and 10-year auctions showing decent foreign demand. Unfortunately the 30-year auction was a huge disappointment and caused mortgage interest rates to worsen Thursday. The fear of future rate hikes sent mortgage bonds lower Friday pushing mortgage interest rates higher.

For the week, interest rates rose by about 1/2 of a discount point.

The consumer price index will be the most important release this week. Any signs of inflation will generally not bode well for mortgage bonds. Retail sales and the Fed minutes are also likely to factor into trading this week. Any surprises may lead to mortgage interest rate fluctuation.

Tax Credit
A slew of professionals tied to the housing sector made eager pleas to Congress last week requesting the $8000 first time homebuyer tax credit be extended. The benefit was part of the stimulus plan and is set to expire the end of November. The White House indicated the program “helped the economy” and led to “quite a bit of success” and noted consideration of extending the program. There are additional proposals in the Senate to not only extend the program, but also to increase the tax credit and remove the first time homebuyer qualification. Unfortunately the cost to extend the credit is about $1 billion per month. This concerns politicians from both sides of the aisle. The House voted Thursday to extend the credit for American service members another 12 months. Both parties have members pushing for the extension to apply to all purchasers. Analysts indicate some sort of extension is very likely.

Last week was an example of the danger in thinking rates would always improve. The good news is that despite last week’s bounce higher, rates still remain historically favorable.

Related Articles: First Time Homebuyer, Home Buyer Tax Credit, Interest Rate, Treasury