Markets: Bonds took a hammering today as the market reacted to some less-negative-than-we-thought news in unemployment and productivity.  It’s the biggest loss on mortgage-backed securities in several weeks, enough to push rates up by .125% to .25%, depending on the program.  Now just under 5% on conventional programs, and 5% on FHA.  As always, don’t take this general estimate as YOUR rate.  Only your doctor knows for sure.

Analysis: I said several times before that the key driver on low rates was employment, and that proves accurate today, as unemployment figures were just not as bad as they were supposed to be.  The thought is that with all this cash being pumped into the market by the government, the only thing restraining inflation at this point is the fact that everyone is losing his job.  The minute that stops happening, inflation is sure to take a turn higher, and that will erode the value of bonds, causing rates to rise.  I don’t think we’re done here.  I think rates are headed back up.

Watch for a burst of refinances right here in the next week, followed by the largest drop in mortgage applications in history the middle of May.  If rates rise, all this beneficial mortgage activity will stop like a mother turning off the kids’ bath.  Utah mortgages, Lehi mortgages in particular, will be heavily affected.

Hope I’m wrong, folks.

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