Don Grimes

Mortgage markets worsened last week on a mixed bag of economic data. Inflation data came in soft, but so did the start of the holiday shopping season.

For the first time in a month, mortgage rates worsened last week, adding roughly 0.125 percent on conforming fixed-rate products, and a little bit more on ARMs.

Despite rates worsening, there was still some good news for home buyers and would-be refinancers. Mortgage rate volatility was markedly lower than in recent weeks. You could shop for mortgage rate last week and actually take your time about it.

This is in stark contrast to the last month or so over which mortgage rates changed every few hours, on average.

This week, though, because a heavy data calendar is combining with a holiday-shortened trading week, rates aren't likely to stay as tame.

• Monday: Existing Home Sales
• Tuesday: Consumer Confidence, Home Price Index, Fed Minutes
• Wednesday: New Home Sales, Personal Income and Outlays

Each of these data points are market-movers by themselves. In tandem, however, they could really shake things up. Then, at the tail end of the week, markets will react to Black Friday.

If stores look full Friday and initial receipts appear high, stock markets should rise at the expense of bonds, leading mortgage rates higher.

Additionally, expect that mortgage rate changes will be amplified because of low trading volume. This could work in your favor, or out of your favor -- depending on the market direction.

With mortgage rates at such low levels and unlikely to fall much further, locking a rate is advisable. If you choose to float, though, keep your loan officer on speed dial because when rates do rise, they're going to rise quickly.

Mortgage markets improved last week as foreign buyers of mortgage debt helped to push mortgage rates to a 4-week low.

It marked the 3rd consecutive week that rates improved, breathing extra life into this year's ongoing Refi Boom.

Fixed-rate, conforming mortgage rates fell about 0.125 percent on the week. ARMs did about the same.

There wasn't much data to move mortgage rates last week; investors worked mostly on momentum and trends. However, the Friday University of Michigan Consumer Sentiment survey release garnered some attention.

After worsening in August and September, consumer sentiment fell for the third straight month in October. Analysts worry about what it could mean to the economy. Holiday Shopping season is here and consumer spending fuels the economy. If households hold the purse strings tight, our nation's budding economic recovery may stall.

In a scenario like that, employment rates won't rebound so fast, but rate shoppers might not mind. Slower-than-expected economic growth tends to suppress mortgage rates, helping to improve home affordability overall.

This week, data comes back into focus.

At 8:30 AM ET today, the government will release October's Retail Sales report. This one should be closely watched for its ability to change rates. A weak report should drag rates down, and a strong one should push rates up.

Then, on Tuesday and Wednesday, look for PPI and CPI -- two key inflation indices. Inflation causes mortgage rates to rise so if either of these reports comes in hotter-than-expected, rates will almost certainly rise.

And, lastly, also on Wednesday, we'll get the Housing Starts report for October. Don't expect the markets to move on this one, but keep an eye on the data anyway. Housing markets remain crucial to economic recovery.

Despite rates hovering near recent lows, remember that markets change quickly. A rate quote from the morning is rarely valid by the afternoon and, when rates rise, rates rise fast.

Mortgage markets were extremely volatile last week, carving out a wide range between Monday and Friday.

Thankfully for rate shoppers, the overall momentum was positive.

Mortgage rates fell for the second time in as many weeks. Rates still sit higher versus their early-October lows.

For pure "news", last week was a busy one:

• The Federal Reserve held the Fed Funds Rate near 0.000 percent
• The Unemployment Rate crossed 10 percent
• The First-Time Home Buyer Tax Credit was extended to April 2010

Combined, the 3 events reinforced the growing belief on Wall Street that the U.S. economy is in recovery, but not yet out of the woods. This particular philosophy has been excellent for mortgage rates, helping to hold conforming 30-year fixed mortgage rates near 5.250 percent since the start of the year.

It helped rates last week, too. But low rates aren't without threats.

For one, the Fed's vote to hold the Fed Funds Rate near 0.000 percent will eventually spark inflation concerns. When it does, mortgage rates will rise. That won't be this week, though.

Actually, nothing may happen this week -- there's not much data to release. Apart from a retail report, a confidence survey and some Fed speakers, the calendar is bare. That, and Wednesday is a federal holiday.

However, without data, markets often trade on things like geopolitics, or energy concerns, or momentum. In other words, don't be lulled into thinking rates won't change this week.

At least for now, the mortgage rates look good. By the end of the week, that may not be the case.

Mortgage markets improved last week after a series of hugely volatile trading sessions. Rates carved out a wide range on the week, culminating in a late-Friday plunge that dropped rates by about 1/8 percent. It was the first time in 5 weeks that mortgage rates fell. Volatility like that of last week is nothing new on Wall Street; it's been a running theme in 2009. Volatility occurs when markets don't agree on what's next for the economy and, this year, there's been a lot of disagreement like that.

Data has been inconsistent. Take last week for example: At 9:00 AM Tuesday morning, the Case-Shiller Index showed home prices rising nationwide. Because many analysts believe housing fueled the recession, strength in the sector is widely construed a positive for the economy.

Mortgage rates rose on the news. But then, an hour later, the national consumer confidence report revealed a substantial deterioration in sentiment versus the month prior. The data forced Wall Street to do an about-face. Housing is important to the economy, but it can't affect growth like consumer spending can. When Americans are less confident about their future income, they tend to keep their wallets closed, retarding economic growth.

Holiday Shopping Season is getting underway and the last thing businesses want to see is a suddenly reserved American shopper.This week, the volatility should continue. In addition to the release of key employment and housing data, the Federal Open Market Committee has a scheduled 2-day meeting. The group's Wednesday afternoon adjournment will influence mortgage rates.

The Fed is widely expected to keep the Fed Funds Rate in its target range near 0.000 percent, but it won't be what the Fed does that will matter as much as what the Fed says. If the FOMC's press release shows optimism for the economy, mortgage rates will rise in response.

Alternatively, if the Fed appears more dour, rates will fall.

Either way, consider locking your rate before the Wednesday afternoon announcement.

Mortgage markets were volatile last week, making it very difficult to shop for mortgage rates.

On most days, lenders issued multiple rate sheets with the trend putting rates higher in the morning, and lower in the afternoon.

Overall, mortgage rates were unchanged on the week. It broke a three-week streak through which mortgage rates rose.

Rates remain roughly one-half percent higher than the lows of early-October.

The biggest positive for rate shoppers last week was tame economic data -- specifically concerning the Producer Price Index and the housing sector.

The Producer Price Index is an inflationary, Cost of Living-like measurement for businesses and it went negative in September. Analysts weren't expecting that and the surprise pulled rates down an eighth.

Similarly, in housing, both the Home Price Index and Housing Starts figures were softer than expectations. These, too, tugged mortgage rates down.

At least temporarily.

We say "temporarily" because -- all week long -- a steadily-weakening U.S. dollar was leading mortgage rates higher.

All things equal, mortgage rates rise as the dollar loses value and, last week, the dollar touched a 14-month low versus the Euro. The greenback's weakness countered most of the "positive" news for rate shoppers and is a major reason why rates were so volatile.

The volatility should continue into this week, too. With little data and no Fed speakers, look for mortgage rates to move with the market's momentum.

Lately, momentum has been pulling rates higher so if you're floating a rate and trying to time a bottom, the chances are good that we already passed it. Consider locking your rate before rates rise much further.

Once rates break 6 percent, they may not come back down.