Mortgage markets improved last week as foreign buyers of mortgage debt helped to push mortgage rates to a 4-week low. The strength of the Stock Market and higher commodity prices should have pushed mortgage interest rates higher, but the bond market refused to play by old rules.

It marked the 3rd consecutive week that rates improved, breathing extra life into this year’s ongoing Refi Boom.

Fixed-rate, conforming mortgage rates fell about 0.125 percent on the week. ARMs did about the same.

There wasn’t much data to move mortgage rates last week; investors worked mostly on momentum and trends. However, the Friday University of Michigan Consumer Sentiment survey release garnered some attention.

After worsening in August and September, consumer sentiment fell for the third straight month in October.  Analysts worry about what it could mean to the economy.  Holiday Shopping season is here and consumer spending fuels the economy.  If households hold the purse strings tight, our nation’s budding economic recovery may stall.

Consumer Sentiment

In a scenario like that, employment rates won’t rebound so fast, but rate shoppers might not mind.  Slower-than-expected economic growth tends to suppress mortgage rates, helping to improve home affordability overall.

This week, data comes back into focus.

October’s Retail Sales report came out on Monday.  The report was better than expected, until you take out the auto sales, with Cash 4 Clunkers still impacting that number.  Mortgage rates in Charlotte improved Monday, even as the stock market improved.

On Tuesday and Wednesday, look for PPI and CPI — two key inflation indices.  Inflation causes mortgage rates to rise so if either of these reports comes in hotter-than-expected, rates will almost certainly rise.

And, lastly, also on Wednesday, we’ll get the Housing Starts report for October.  Don’t expect the markets to move on this one, but keep an eye on the data anyway.  Housing markets remain crucial to economic recovery.

Despite rates hovering near recent lows, remember that markets change quickly.  A rate quote from the morning is rarely valid by the afternoon and, when rates rise, rates rise fast.  We are now seeing the low rates again we saw for a few hours on October 5th.  When rates turn around, they tend to shoot up, but fall slowly.  I think we are near the end of the slow fall.