Stocks surge in July sending refinance rates higher

Refinance mortgage rates are moving up quick in the month of July. The stock market rally back above the 9000 point level is one of the key ingredients driving mortgage rates to move higher. The stock market has rallied over 800 points in the month of July pushing the DOW above 9000 points for the first time since January of this year. Mortgage rates have moved up almost .5% for the month, pushing the average rate for a thirty year fixed rate loan above 5.5% with national mortgage lenders.

The market has rallied from an early month sell off based on key economic and investment reports that have helped investors regain confidence that the equity markets are stabilizing. This month, investors have been greeted with a better than expected housing report, a key ingredient with rebuilding confidence in the economy. The improved housing numbers can be directly tied into historically low mortgage rates and abundant housing supply. Combining the low mortgage rates with the government tax rebates have started to bring buyers back into the market.

Corporate earnings have been much better than most experts had predicted. This month, companies such as JP Morgan Chase, Ford Motor Company, Goldman Sachs and Caterpillar have all posted excellent earnings report. These companies have been instrumental in calming fears of a long term economic recession. The reassurance for investors that corporate earnings for 2010 are a going to be better than expected has been a critical factor with equity investors who drove the market down to the 6500 point level in March of this year based primarily on fear of a world wide economic meltdown.

The likelihood of refinance mortgage rates remaining at historically low levels for the remainder of 2009 should be pretty good. The FOMC is closely following the secondary mortgage marketplace, and Ben Bernanke is on record indicating they would be proactive in helping to keep rates low and improve housing. The Fed, has played a critical role in driving down mortgage rates to below five percent earlier this year and helping to spark a mortgage application bonanza as consumers rushed to refinance and lock in low mortgage rates. There are a number of key factors that should help keep mortgage rates between five and six percent for the balance of 2009:

• Low levels of inflation in the market
• High levels of unemployment
• Conservative investors who want to remain invested in bonds
• FOMC commitment to keeping mortgage rates low

The probability of mortgage rates ranging in a one percent trading pattern is very strong. With the above factors working to keep rates in check over the long term, home owners considering purchasing a new home or refinancing their existing homes will need to gauge market direction when they are looking to lock in their rates. Interest rates have been relatively stable in 2009 and have rarely moved up more that .25% in a weeks time, however things could change and lenders that offer borrowers rate locks with float down options are providing a great service in today’s economic marketplace.