Mortgage markets improved last week on a weak jobs report, expectation for new market stimulus, and growing evidence of a global economic slowdown. Overall, conforming mortgage rates in California improved for the first time in 3 weeks. On a product-by-product basis, though, mortgage rates are faring differently. According to the Freddie Mac weekly mortgage rate survey last week, the 30-year fixed rate mortgage was unchanged but the 15-year fixed rate mortgage and the 5-year ARM fell.

The great news is that the 5-year ARM is at a new all-time low for qualified borrowers!

A drop in 5-year ARM rates throughout California without a corresponding drop in 30-year fixed mortgage rates signals that markets expect the economy to stabilize over the long-term but with weakness in the near-term. The 5-year ARM’s ultra-low rates suggests marked weakness ahead. The 5-year ARM may get another boost this week, as well.

While U.S. markets were closed for Labor Day, Eurozone nations were hit with a new wave of sovereign debt concern, this time centered on Italy. Greece, Portugal and Ireland have already been the subject of debt default debate this year. Italy’s inclusion hit equity market hard and safe-haven buying re-commenced. This should give a good start to mortgage rates this week. Look for rates to start lower. That’s not to say, however, that they’ll finish the week lower. With very little economic data due for release, markets will move on momentum and momentum can change at any time.