WeeklyBasis 01/23/06: HELOC Rates Could Go Up, First Mortgage Rates Could Go Down

There was no MarketWeek last week because it was a holiday-shortened trading week and rates were relatively flat – as they’ve been for much of January. Next Tuesday is the year’s first and Alan Greenspan’s last Fed meeting, where we can expect a .25% increase in the overnight Fed Funds Rate. This will cause a .25% increase in home equity second mortgages, but primary mortgages could actually go down. The reason is because it’s likely that the Fed will indicate that they are toward the end of their tightening cycle. HELOCs are more closely tied to Fed Funds, but intermediate ARMs and fixed mortgages are tied mortgage bonds. If the Fed says their tightening cycle is almost over, bonds prices would go up and bond yields (or rates) would drop. This would cause mortgage rates to drop. Let’s keep our fingers crossed. Rates should be even this week as traders wait for the Fed meeting. The most important data for the week is 4Q GDP on Friday, which will give markets a feel for economic growth in 2005. We’ve also got December’s Existing Home Sales on Wednesday and New Home Sales on Friday. These are useful measures of activity, but they never have much of an impact on rate markets.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.0% (6.14% APR)
15 Year: 5.625% (5.765% APR)
5/1 ARM: 5.875% (6.025% APR)

Jumbo ($417,001 – $650,000) – NO POINTS
30 Year: 6.375% (6.515% APR)
15 Year: 6.0% (6.14% APR)
5/1 ARM: 5.875% (6.025% APR)