What's Ahead for Mortgage Rates This Week: December 24, 2012

Mortgage markets worsened last week amid ongoing discussions budget and tax conversations in Washington, D.C., and the release of key housing and economic data.

Mortgage rates climbed in Florida and nationwide.

Freddie Mac reported the average 30-year fixed rate mortgage rate at 3.37 percent nationwide for borrowers willing to pay an accompanying 0.7 discount points at closing, plus closing costs -- an increase of 0.05 percentage points from the week prior.

The average 15-year fixed rate mortgage rate was listed at 2.65 percent nationwide with an accompanying 0.7 discount points plus a full set of closing costs.

With certain government funding and tax reductions set to expire December 31, legislators appear unlikely to avoid what's been called the "Fiscal Cliff". Some economists believe that reaching January 1 with no agreement in place will set the economy in to recession.

Mortgage rates tend to improve on "negative" news for the economy, which partially explains why mortgage rates made a small comeback late in the week.

In other news, according the National Association of REALTORS®, Existing Home Sales reached their highest point since November 2009, climbing to 5.04 million homes sold on a seasonally-adjusted, annualized basis. In addition, the real estate trade group reports that the Existing Home Supply has dropped to 4.8 months -- a figure firmly suggesting a "seller's market".

Separately, the Commerce Department reported single-family housing starts rising, too; down 4.1 percent in November but up nearly 23 percent as compared to November 2011.

This week, Fiscal Cliff discussions are likely to dominate mortgage markets. The trading week will be holiday-shortened and volume will be lighter-than-normal. This may lead to volatile pricing and rapid interest rate movements.

Markets close early Monday and remain closed through Tuesday. Wednesday, markets re-open with no new data set for release. Then, Thursday, scheduled economic news events resume Thursday with New Home Sales, Jobless Claims and Consumer Confidence due.

Friday, the Pending Home Sales Index is released.

What's Ahead For Mortgage Rates This Week : December 10, 2012

Mortgage bonds worsened last week as Fiscal Cliff talks moved closer to resolution and as the U.S. economy showed continued signs of growth.

Conforming mortgage rates in Florida rose slightly, edging off the all-time lows late in November.

According to Freddie Mac's weekly mortgage rate survey, the average 30-year fixed rate conforming mortgage rate was 3.34% last week for home buyers and refinancing households willing to pay 0.7 discount points at closing plus a full set of closing costs.

Freddie Mac also showed the 15-year fixed rate mortgage averaging 2.67% with an accompanying 0.7 discount points plus closing costs.

1 discount point is equal to 1 percent of your loan size.

The two big stories that moved rates worse last week were the Fiscal Cliff talks and the November jobs report.

With respect to the Fiscal Cliff, mortgage rates worsened as Capitol Hill moved closer to a deal which would avoid the dual-event of expiring U.S. tax break and a mandated government spending rollback. These events are both scheduled to occur December 31, 2012. 

Some analysts believe that these two events -- in unison -- could slow U.S. economic growth to the point of recession. Other analysts aren't so sure. However, Wall Street is choosing to be cautious. This is why a break in talks has been good for mortgage rate shoppers of late; and why steps toward avoiding one or both scenarios has been bad for rate shoppers.

Mortgage rates often rise when economic growth is expected. This explains why November's jobs report pushed mortgage rates worse Friday, too -- Wall Street underestimated the Non-Farm Payrolls report which showed 146,000 net new jobs created, and didn't expect to see the national Unemployment Rate drop to 7.7%.

This week, mortgage rates may rise again with new inflation data and a Retail Sales report set for release.

The big event, though, is the Federal Open Market Committee's 2-day meeting scheduled, set to begin Tuesday. The FOMC is not expected to add new economic stimulus, but the Fed's words can carry as much weight as its policies and actions.

The Fed will issue a statement to the markets at 12:30 PM ET Wednesday, and will host a press conference shortly thereafter. Mortgage rates are expected to remain volatile all week.