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This article was forwarded to me by Steve Rassin from SunTrust Mortgage.

This week's (week ending 10/31) economic data and comments from Fed officials confirmed the
economic outlook shared by most investors, namely that the economy is
slowing sharply. Wednesday, the Fed cut the target Fed Funds rate by one
half point to 1.00%, as widely expected. The vote was unanimous and
followed a coordinated half point rate cut on October 8. Investors
believe the statement left the door open for further rate cuts and have
priced in another half point rate cut before the end of the year. The
Fed appears to be most concerned with boosting near-term economic
growth. While aggressive short-term stimulus is good for the stock
market, mortgage investors are worried about its impact on long-term
inflation, and those concerns helped pushed mortgage rates higher during
the week.

 

A second factor also contributed to this week's rise in mortgage rates.
The federal government's takeover of Fannie Mae and Freddie Mac in
September left mortgage investors with the impression that there was
explicit government backing of the debt and guarantees issued by Fannie
and Freddie. Government officials have been sending mixed messages,
however, raising some concern about whether the two companies really
will have the long-term backing of the government. Due to the
uncertainty, investors, particularly important foreign investors, have
been reluctant to invest in Fannie and Freddie guaranteed mortgage
backed securities. Yields required by mortgage backed security investors
directly affect most mortgage rates. If the government were to
unambiguously convince investors that it will stand behind Fannie and
Freddie guarantees, then mortgage rates could be expected to move lower.

 

The biggest report next week will be Friday's important Employment data.
As usual, this data on the number of jobs, the Unemployment Rate, and
wage inflation will be the most highly anticipated economic data of the
month, since the health of the labor market is perhaps the single
biggest factor in the performance of the economy.

 

Earlier in the week, the ISM manufacturing index and Construction
Spending will be released on Monday. ISM Services is scheduled for
Wednesday, and Productivity will come out on Thursday. Finally, Pending
Home Sales, a leading indicator for the housing market, will be released
on Friday.

Copyright @ 2008 MBSQuoteline

So continue to hang in there folks. It is almost a new year!
Christina