A Licensed California Mortgage Originator

Market recap for week ending 8/31/2012

This week was a relatively calm week for mortgage rates compare to recent weeks. As of this morning rates were slightly better than they were Monday morning and by the end of today they ended up about .25% better than Monday.

This morning the Federal Reserve Bank(FED) President Ben Bernanke held his long awaited opening speech at the Jacksonhole conference. The reason this speech was so anticipated was because investors were waiting to see if Bernanke would reveal any details in regards to another quantitative easing program. As I have mentioned in my previous articles another easing preprogram would stimulate the economy by having the FED purchase additional Treasury bonds and mortgage backed securities which in turn would bring down interest rates and the cost of borrowing which in theory would cause people to spend more money and stimulate the economy.

Like many times when Bernanke speaks he said a lot without giving any details. In today’s speech he did not give any details about another easing round but he did mention that the FED is ready to ease if they see the need to. Apparently that was enough for investors, because we saw a big rally in the bond market after the speech. Once again a rally in the bond market equals lower interest rates.

In Europe this week leaders have continued on working on a plan to solve their debt problem. Germany is still showing some opposition to the current plan, but they are not as strongly opposed to it as they were. The German court is to rule on whether it is legal or not for the European Central Bank (ECB) to buy bonds from struggling EU countries on September 12th . The reason Germany has so much to say in the matter is that they are the largest economy in Europe and there for has most of the money. Once again the reason this affects mortgage rates is that when Europe is in trouble investors move their money to safer US investments driving down our rates.