Houston's Rate Sheet

Rate Watch

As was the case last week, oil and inflation dominated the markets and continued to push mortgage rates higher. Freddie Mac's weekly survey marked a 6.53 percent average for the benchmark 30-year fixed rate mortgage (FRM) up from the previous week's 6.49 percent. The 30-year FRM has not been higher since July, 2002. Other programs continued to follow the 30-year. The average for the 15-year FRM is 6.17 percent, up from the previous week’s average of 6.14 percent. And one-year Treasury-indexed ARMs averaged 5.63 percent, up from the previous week when it averaged 5.61 percent.

On Tuesday, PPI was released with a fairly positive reaction from the markets. That same day, the minutes from the Fed's last FOMC meeting added to the positive feelings. Some Fed members gave indications that they might be about finished with their rate raising bonanza. As a result of these two releases, rates moved slightly down by Tuesday’s close.

With Wednesday came CPI, the most watched measure of inflation and the results were not as promising as Tuesday's. The headline CPI number matched the forecasts, but Core CPI, which removes the volatile food and energy components, increased at a 2.1% annual rate, compared to a consensus of 2.0%. While the markets watched this report come in, oil prices were sky rocketing. The price per barrel of oil reached $75 last week. The highest price ever recorded. These two factors helped shift the momentum back to the bears and forced mortgage rates up for a 4th straight week.

This week the economic calendar will be dominated by economic growth reports. The most important will be released on Friday with the initial release of 1st quarter GDP numbers. This report is the broadest measure of economic activity and it does take a couple of tries to get it right. However, this initial release can have a big impact on the markets. Next in importance will be Wednesday’s report on Durable Goods Orders. This report measures the demand for "big-ticket" items with long lasting lifespan, such as automobiles, airplanes, etc. We'll also get some insight into the effects of higher mortgage rates on the real estate industry, when Existing Home Sales and New Home Sales are released on Tuesday and Wednesday respectively.

I would recommend that borrowers lock their rates as soon as possible. The path of inflation is still uncertain, and the upcoming GDP report adds an extra layer of uncertainty.

posted by Vincent Biondillo @ 11:49 AM