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May 9th, 2009 11:05 AM

Rise in mortgage rates

Freddie Mac has announced that the mortgage rate (30-year
fixed rate) for the week ending May 7 rose to 4.84%, from
4.78% for the earlier week. Incidentally, 4.78% was an
all-time low. The rise in rate is significant more from a
directional perspective than from the point of view of the
magnitude. Does the rise indicate that the underlying
sentiment has turned bullish? Frank Nothaft, the chief
economist of Freddie Mac said, "Mortgage rates rose slightly
this week amid positive economic news that the economy may
be approaching the bottom of the recession." The initiative
of Federal Reserve, since November 2008, to prop up the
real estate market by buying $1.25 trillion worth mortgage
backed securities seems to be working. The slump in the
real estate market is closely linked to credit crisis and
economic downturn. Is the underlying strength in the
market for real, and will it lead to economic recovery? We
will know in the months to come.

Posted by Matt Urbanovsky on May 9th, 2009 11:05 AM