Mortgage Rates for the week of:   January 3, 2012

Mortgage markets improved last week during a holiday-shortened trading week. The mortgage bond markets were closed Monday for Christmas, and closed early Friday afternoon. Trading volume was light all week long, which contributed to a year-end rally.

Mortgage bonds made their largest one-week gain in two months as conforming mortgage rates in Idaho fell to new lows nationwide.

Because most of the improvements transpired Wednesday and Thursday, Freddie Mac’s weekly mortgage rate survey failed to capture the action. The survey’s poll of more than 125 banks across the country “closes” Tuesday.

As a result, Freddie Mac reported mortgage rates rising to 3.95% with an accompanying 0.7 discount points plus closing costs, where 1 discount point equals one percent of your borrowed amount. However, those rates represented the high point for the week.

By Friday, conforming loans “with points” were noticeably lower as compared to Freddie Mac’s weekly survey. Loans without discount points were little changed, however.

The same was true for FHA mortgages.

This week, though, the calendar reads 2012. Unfortunately, we’re still watching the stories that drove mortgage rates for much of 2011 — the Eurozone and its members’ debt obligations, and the U.S. jobs market.

As the year concluded, there were fresh fears of trouble in Italy, which has large amounts of debt due in the early part of the year. There were also stern warnings from Eurozone leaders that a difficult 2012 may be ahead.

Events like these are often good for U.S. mortgage rates.

And, this week, the government releases its December Non-Farm Payrolls report. The report moves markets — especially when the actual number of jobs created deviates from consensus estimates.

Economists expect that 150,000 net new jobs were created in December.

Momentum may draw rates lower this, or mortgage rates may begin to rise instead. The direction depends on the outlook for 2012, both domestic and international. The safe play is to lock a mortgage rate now.

Rates have more room to rise than to fall.

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