THE BASIS POINT

WeeklyBasis 10/02/06: Simple Mortgage Math

Since the Fed rate pause on September 20, fixed and ARM rates have come down about .25%. The logic driving rate markets lower is that the Fed’s 4.25% of rate hikes from June 2004 to June 2006 have beat inflation out of the economy. But since inflation data lags the economy by about six months, the Fed will need to see several months of data before they think it’s time for a rate cut. However, we can probably count on another pause at the October 24 Fed meeting, which will keep markets trading in their current range, and encourage buyers and sellers.Today, we saw weaker manufacturing data which helped rates slightly. The big market movers are Wednesday when Fed Chairman Ben Bernanke speaks at the Economics Club of Washington, and Friday when August jobs growth is reported. It’s likely Bernanke will say what I said above about data dependency, and a weaker jobs report would help rates.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.25% (6.39% APR)
10/1 ARM: 6.25% (6.39% APR)
5/1 ARM: 6.125% (6.275% APR)

Jumbo ($417,001 – $650,000) – NO POINTS
30 Year: 6.375% (6.515% APR)
10/1 ARM: 6.5% (6.64% APR)
5/1 ARM: 6.25% (6.4% APR)