What the rest of the week holds in store for the movement of mortgage interest rates remains to be seen, but there are a couple of reports due out this week that may have a further effect. The monthly change in personal income data is expected to be reported from the U.S. Department of Commerce. Last month the report showed an increase in personal income, which may also be an indicator that the economy is starting to make a recovery.

If and when the economy starts to recover, it’s likely that the mortgage interest rates will continue to increase. So far this week, the rates are holding steady so far. The national average for a 30-year mortgage is 5.25% and for a 15-year mortgage is 4.69%.

Early last week, after a major rally in the mortgage backed securities market, mortgage rates dropped below the 5 percent mark. Within a few days, the price of mortgage backed securities took the plunge, which sent mortgage lenders into a scrambling panic to re-price. This brought mortgages rates up above the 5 percent mark—moving the 30 year fixed rate mortgage to a rate of about 5.25%.

So what caused this bump up in rates?  

For one thing, the housing sales of new homes data came in better than what was expected. The average sales length time dropped from 9.8 months to 9.4 months. Then the stock market came back—going a little bullish—in response to some earnings reports that were higher than expected. All of this combined with the fact that the treasury announced the sale of treasury notes this week bumped rates up a notch.

So far today, the rates are holding at a level slightly above 5 percent, putting the average 30 year fixed rate mortgage between 5.125% and 5.25%.

Since this month hasn’t quite come to an end, the unemployment numbers aren’t in yet, but the Wall Street Journal is already reporting that the unemployment rate is expected to hit the double digits. The rate in May of 2009 marked a 26-year high at 9.4 percent of Americans jobless. With General Motors (GM) and other major corporations calling it quits, jobs lost in June reached upward from the May figure to 467,000, which shot the unemployment rate up to 9.5%. In light of a declining economy and job loss, there is a light at the end of the tunnel because interest rates have dropped once again in an effort to stimulate the economy.  

Continued Rate Drops

Over the past two weeks, interest rates on mortgages have dropped even further, bringing rates to the lowest point in the past six weeks. On average, the most recent decline in rates dropped interest rates across the board by up to a quarter of a point, so borrowers can now finance their purchases and refinance their existing homes and save money while doing it.

Unemployment Continues to Rise

This may not benefit the recently unemployed that don’t have the money to make a new purchase or refinance an existing mortgage, but it does give a jolt of activity to the real estate market—making it even more advantageous for buyers to take advantage of the depressed purchase prices and the low interest rate for financing purchases. It also, however, indicates that the rollercoaster ride of this tumultuous economy hasn’t reached the end of the track quite yet. As unemployment rates continue to rise, interest rates may continue to drop in an effort to keep balance in the waning economy, leaving some to wonder if the tradeoff is really worth it.