Long-term mortgage rates began drifting back upward during the month of January, even as poor economic news continued to dominate the marketplace. However, some analysts have been pointing out that economic data released in January has not been as bad as most expected. Our first glimpse into the GDP numbers for the fourth quarter of last year revealed an economy shrinking 3.8%, which was better than the 5.5% feared. While the housing market continues to struggle, existing home sales crept upward by 6.5%. Of course, many of the sales were foreclosure or distressed sales, but the lower prices are bringing more buyers back into the market. Manufacturing continues taking heavy losses, but a few signs of stabilization did appear. Probably the worst news of the month came with January’s employment figures. Unemployment climbed to 7.6%, with another 598,000 jobs lost. This was the largest jobs lost number in thirty-four years.

February could be a very volatile month for mortgage rates, primarily in reaction to what happens in Washington. The second half of the $700 billion Troubled Asset Relief Program was unveiled on February 10th to disappointment in the marketplace regarding the significant lack of details for the program. Additionally, the Treasury Department delayed any announcement regarding its plans to help the housing industry. At the same time, Congress is rushing to pass another economic stimulus package that largely ignores housing issues. According to the President, housing will be addressed separately in the very near future. Over the next few weeks, the moves made, or not made, in Washington could drive mortgage rates either way. If a plan is announced, as has been rumored for some time, that would drive 30-year conforming mortgage rates down to 4.0% to 4.5%, it is likely that all mortgage rates will move downward. However, if concrete plans for major help for the housing and mortgage industry do not surface during February, we could see mortgage rates continue to climb upward as lenders seek to mitigate unresolved risks that they perceive in the market.