Last Week in Review Last weeks stock market tumble helped rates improve slightly to 6.25% on the 30yr while the 15yr is 5.75%. Jumbo mortgage rates are still far from their past levels and the 30yr fixed are in the mid 7% range and the 3/1 and 5/1 Arms are in the mid 6% range.  FHA and VA run 6.25%-6.5%.

"I NEVER WORRY ABOUT ACTION, BUT ONLY ABOUT INACTION." ~ Winston Churchill. These words proved especially true last week, as the big story was the Fed's lack of action following their recent meeting, or decision to leave the Fed Funds Rate unchanged - but is the Fed's decision a cause for worry? The financial markets seem to think so. The Fed is in a tough spot with the economy performing sluggishly, the housing market still struggling to stabilize, consumer confidence being low, and food and energy costs going up seemingly every day. They made the decision to hold rates steady for now, but looking forward, what does all this mean for Bonds and home loan rates?

While the Fed made a smart move to cut its benchmark rate back in September to stimulate the economy, the continued string of cuts has considerably weakened the US Dollar against the Euro. And since oil is priced in Dollars, the decline of the Dollar has pushed oil prices to rise, even though consumption in the US is down. Prior to the Fed starting their recent string of cuts in mid-September, oil was trading at a then staggeringly high $73/barrel, and it took $1.35 to buy 1 Euro. And after nine months of Fed rate cuts, the Dollar has weakened to where it takes $1.57 to buy 1 Euro...which has greatly influenced oil prices to top $140/barrel. And because oil is involved in so much of what we purchase, prices have gone up on everything.

The bottom line: A stronger stance against inflation by the Fed - which would mean rate hikes ahead - could help strengthen the Dollar, combat high oil prices, and cause Bonds and home loan rates to improve in turn, as inflation is the arch enemy of both. It will be important to see what the Fed decides to do about the Fed Funds Rate at their next meeting in August, so stay tuned!

In other news, Bonds and home loan rates saw some improvement last week after several items...including a profit warning from UPS (a concern since less shipping indicates less sales and continued weakness in the economy), a price increase from Dow Chemical due to the rising cost of energy, weak Consumer Sentiment...caused money to flow from Stocks to Bonds and helped pressure Stocks to what could be their worst June performance since the Great Depression. After all the week's action - and inaction - Bonds and home loan rates ended the week slightly better than where they began, mostly due to weaker Stocks.