The Bridgewaters, Massachusetts

Looking Back

Mortgage interest rates ended last week up slightly following some stronger than expected employment data on Friday.

The Fed lowered the overnight lending rate another 0.25%, making 7 straight drops since September 2007. Analysts are forecasting that this could be the last decrease, and predict possible hikes in the fall.

In other news - all bad - the number of vacant homes homes in the US hit a record high of 2.9%, up over 100,000 units in the last 12 months. Foreclosures are up 112% over the first quarter of 2007. The nation's largest lender, Countrywide, reported losses of $893 million in the first fiscal quarter.

Looking Forward

Don't expect much activity from Wall Street this week as most of the economic data is only moderate in their ability to influence rates.

Pending Home Sales on Wednesday is of some interest, but will have little effect on rates.

Are Rate Cuts Hurting the Housing Market?

In its efforts to spark the economy and bail out the faltering housing market, the Federal Open Market Committee (The Fed) has lowered the fed funds rate to 2.0%, down from 5.25% last September.

While this has had some of the desired effects, like cheaper mortgage and credit card rates, there are some economic side effects that we are suffering on a daily basis. How about higher gas and food prices? When the Fed fund interest rates are low, many investors will look overseas for a currency that has a higher yield. This weakens the dollar, which makes it more expensive to buy foreign goods, like oil. Soaring fuel prices and a declining housing market are causing consumers as well as businesses to cut back.