Houston's Rate Sheet

Rate Watch

Last week, mortgage rates continued to slowly creep upward. Freddie Mac's weekly survey revealed an average rate of 6.24 percent. Up only 1 basis point (a basis point is 1/100 of percentage point) from last week, this week’s jump was milder than that of the past couple of weeks. Bankrate's experts believe this trend will continue for the foreseeable future. Two-thirds of the contributors to their weekly survey believe rates will continue to rise over the next 30 days.

Frank Nothaft, chief economist for Freddie Mac commented that this slow upward movement in rates will continue through 2006. "We see this trend continuing throughout 2006, with the 30-year FRM ending the year at about 6.3 percent as the housing market eases back from last year's record setting levels toward a somewhat more normal rate of activity.", he said. Mr. Nothaft's prediction is optimistic. Many economists believe that rates will finish the year as high as 7 percent. Of course anything can happen between now and the end of the year.

This week several scheduled events could prove to push rates one way or the other. The most exciting event is new Fed Chief Ben Bernanke's first testimony before Congress on Wednesday. The Fed Chairman testifies in front of Congress only twice a year and it can be a very consequential event when the Fed reveals new information or opinion. Barring an earth shattering release, this will more than likely become a study of Bernanke's style and personality in comparison to Greenspan’s.

Starting Tuesday, the economic calendar will yield economic data each day. All of these reports will have moderate impact on mortgage rates. Tuesday, the Retail Sales report will be released. This report will measure the level of purchases by consumers, whose spending makes up about 70% of economic activity. Wednesday’s Industrial Production report will shift the focus to output by businesses. Thursday, we will see how higher rates have effected the housing sector with the release of Housing Starts. Finally, Friday’s Producer Price Index will give us some important information about inflation. The PPI measures the price increase in the intermediate goods used to manufacture finished products. It should be an interesting week.

posted by Vincent Biondillo @ 8:51 AM