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U.S. mortgage interest rates plunged downward early through most of September 2008, according to data from Freddie Mac, but they experienced a similarly large upward tick during the last week of the month. From the first week to the second, the average interest rate on a 30-year fixed-rate mortgage dropped a sizable 0.42 basis points to 5.93 percent, excluding points, to 6.35 percent. From there the rate continued free falling to 5.78 percent, the lowest rate in almost nine months. Yet during the week ended Sept. 25, the average rate leaped back up 0.31 basis points to 6.09 percent.
Some of the factors influencing mortgage interest rates in September included the following:
Refinance when you can cut your rate and term.
Consumer confidence, as measured by the Conference Board's confidence index, rose slightly in September, yet a year-over-year comparison reveals that consumer's faith in the economy is still very low.
The Commerce Department reported that the unemployment rate remained 6.1 percent in September, showing no change from August. Last year, during the same month, the unemployment rate was only 4.7 percent.
Consumer spending was essentially unchanged in August from July, the Commerce Department also announced, but incomes and salaries rose by 0.5 percent.
According to the Department of Labor, the rate of inflation in August for all consumer goods except energy and food was 2.5 percent. Inflation rates on food rose slightly while energy prices fell during the same month.
The Federal Reserve left its target federal funds rate at 2 percent during its September meeting, citing both risks of inflation and the increased market turmoil as competing reasons for taking no action at that time.
Several U.S. major companies neared the edge of bankruptcy in September, including Lehman Brothers and AIG, leading to talks of a government bailout bill to save Wall Street from its bad paper. Such crises led to widespread panic and trouble in the financial markets.
What are interest rates likely to do in October? After both the initial rejection and subsequent passage of the bailout bill several days later, the U.S. stock market made record nosedives, wreaking havoc on already chaotic market conditions. During the same week, interest rates on 30-year fixed rate loans were virtually unchanged. Then the Federal Reserve made an emergency rate cut on Oct. 8 to 1.5 percent from 2 percent in order to add liquidity to a spasmodic economy. With so many difficulties in the financial sector, the direction of interest rates is very uncertain. In the words' that Doris Day made famous, "the future's not ours to see!" At least for now that is very true.
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