Market Comment
The brief holiday week curtailed trading. Mortgage bonds rallied with the Fed’s announcement of the new $800 billion plan to help the ailing credit markets (details in article below). This triggered an exciting drop in mortgage interest rates.

For the week, interest rates on government and conventional loans fell by about 1.625 discount points.

The employment report Friday will be the most important data this week. Look for any additional moves by the Fed, the US Treasury, and legislative developments to also result in mortgage interest rate movements.

The New Plan
The US Government announced a new $800 billion spending plan to stabilize home prices and help lower mortgage interest rates. While Treasury bond rates neared historic lows over the past few weeks, mortgage bond rates fell behind. Fortunately, the Federal Reserve announced it would purchase $500 billion of mortgage-backed securities and another $100 billion of debt from Ginnie Mae, Fannie Mae, and Freddie Mac. This spending is an effort to improve credit markets and enable businesses and consumers to get loans. Treasury Secretary Henry Paulson said, “This lack of affordable consumer credit undermines consumer spending and, as a result, weakens our economy.” The Fed will also make $200 billion available to help with the consumer debt market. The positive activity has stimulated buyer confidence, thereby helping the financial housing market.

Welcome to the PERL Mortgage Podcast!

Each week, we’ll produce a wrap-up of the nation’s financial markets with an in-house conversation about a mortgage-related topic.

Special guest Dean Vlamis discusses Fannie Mae and Freddie Mac — who they are, what they do, and what the future has in store.

Click the play button to listen!

Mortgage bond prices rose again last week, pushing mortgage interest rates lower. The demand for mortgage bonds increased after Federal regulators took control of Fannie Mae and Freddie Mac. Trading in the financial markets remained extremely volatile. Oil prices remained low in the beginning of the week, but later increased as Hurricane Ike threatened the Gulf coast. For the week, interest rates on government and conventional loans fell by nearly 1%.

Tuesday’s Fed meeting will be the most important event of the upcoming week. The consumer price index may lead to mortgage interest rate volatility, and leading economic indicators will likely set the tone for the latter portion of the week.