Are mortgage rates going up?

What's Ahead For Mortgage Rates This Week : April 27, 2009

Last week, like the 3 weeks prior, mortgage markets were all over the place from day-to-day.

But, also like the 3 weeks prior, when the week ended Friday, rates were right back where they started from Monday.

For the 4th straight week, mortgage rates started and ended the week essentially unchanged.

Whether or not this is good news depends on your perspective.

For active home buyers who have yet to find the "right home", long-term flatness like this is terrific. While interest rates stay even, buyer purchasing power holds flat and pre-approval letters stay valid.

For buyers under contract or homeowners looking to refinance, though, the market's pattern is a little more rough. Although rates are holding steady week-to-week, the day-to-day action is quite different. Bond markets are volatile and rate swings of a quarter-percent in a day have been common.

How good of a rate you get depends on day on which you shop. This complicates the process of "locking a rate" and makes it very hard for people trying to time a market bottom.

This week, though, the market may finally make a run and break its range.

Aside from it being an unusually data-heavy week, the Federal Reserve meets Tuesday and Wednesday to discuss monetary policy. The data combined with the Fedspeak may push the markets one way or the other towards economic optimism or pessimism for the latter half of 2009.

Lately, it's been a combination of the two -- a "cautious optimism" -- and that's a big reason why mortgage rates have held in a tight range for so long.

Understand, though, that when mortgage rates finally do move, they're going to move in a big way. So, if you're among the crowd looking for lower rates, the best possible outcomes you can hope for this week are:

Weak consumer confidence data (Tuesday, Friday)
Weak consumer spending data (Thursday)
Falling "cost of living" calculations (Thursday)
Fed concerns about deflation and/or recession (Wednesday)
Any of these four events would likely temper hope for a quick economic revival, sending mortgage rates lower. On the other hand, if confidence or spending is strong, or the Fed has no regard for deflation or recession, expect mortgage rates to rise.