Weekend Commentary

On Thursday, crude oil for December delivery slipped $1.55, or 2.7% to stand at $56.34 a barrel to end at the lowest price for crude since mid-June in New York Mercantile Exchange dealings. A week ago, crude price was at $57.53.

The dollar rose to 119.17 yen from 118.73 yen on Thursday, and the euro also fell, down to $1.1685 from $1.1745.

The Metal Market is going up and up. Today early morning Gold for December delivery reached $489.20 an ounce, its highest level since 1987, and was last trading up $1.20 at $488.10 an ounce. Read our recent posting on gold investment. Meanwhile, platinum futures added $7.10 to $989.50. The contract on Thursday reached $1,000 for the first time in more than 25 years, before closing lower. December silver was last up 3.3 cents at $8.14 an ounce.

Benchmark long-term mortgage rates were little changed this week, having climbed without pause for more than two months. The average rate paid on a 30-year fixed loan was 6.37% in the week through Thursday, up from 6.36% last week and 5.74% a year ago. The average for a 15-year fixed-rate mortgage this week was 5.90%, up from last week's 5.89% and last year's 5.15%.

One-year Treasury-indexed Adjustable Rate Mortgage (ARMs) averaged 5.2% this week, up from 5.12%. At this time last year, the one-year ARM averaged 4.17%. Five-year Treasury-indexed hybrid ARMs averaged 5.86% this week, up from last week when it averaged 5.81%.

We are observing the following important trend in Mortgage market: Currently the difference between the 30-year fixed-rate mortgage and the one-year ARM rate is the narrowest it has been since November of 2001. The ARM is thus rapidly loosing its charm among home-buyers.
ARM is a riskier option which is usually sought for initially low monthly payments but vulnerable to rising interest rates after first few years.

[Source of Mortgage data: Freddie Mac weekly report]