Houston's Rate Sheet

Rate Watch

Last week, the Fed raised rates for the 16th straight meeting, but it had little impact on Freddie Mac's weekly survey. For the first time in 6 weeks, the average on the benchmark 30-year fixed rate mortgage came in slightly lower than the previous week. The popular program averaged 6.58 percent, down from 6.59 percent, which had been the highest level in nearly four years. Other popular products followed. Rates on 15-year fixed-rate mortgages dropped to 6.17 percent, from 6.22 percent the previous week. One-year adjustable rate mortgages dipped to 5.62 percent this week, down from the previous week's 5.67 percent.

Due to the timing of their release, this week's Freddie Mac survey may not be the best indicator of last week's activity. After the Fed meeting, bonds and mortgage rates rose steadily throughout the week. Fannie Mae's average on 30-year fixed rates rose 0.02% last week, and 10-year Treasury yields rose to 5.18% from 5.12%.

As always, the Fed's post meeting comments were followed very closely. And although there was a slight change in verbiage, nothing in the statement was much different from the comments following the previous 2 hikes. The Fed will continue to take their decision making one meeting at a time, and base it strictly on near-term economic data.

This week's economic calendar will have a big impact on the possibility for a future Fed rate hike on June 28th. Fed's most important job is to offset inflation, and their most popular tools for tracking inflation are the Producer Price Index (PPI) which will be released on Tuesday and the Consumer Price Index (CPI) which will be released on Wednesday. PPI focuses on the increase in prices of “intermediate” goods used by companies to produce finished products, while CPI looks at those finished goods which are sold to consumers. In almost all instances, if these two reports show higher than expected results, then mortgage rates will rise accordingly. If they show lower than expected results, then mortgage rates will fall accordingly. It is not a good idea to allow rates to float through the release of these reports. If a borrower is in a position to lock their rate prior to their release, then they should lock'em up.

Beyond CPI and PPI, their will be two major economic reports this week. First, Industrial Production will be released on Tuesday. The index of industrial production measures the physical output of the nation's factories, mines and utilities. And on Thursday, we will see if the help of our industry is still going strong with the release of the Housing Starts report.

posted by Vincent Biondillo @ 10:25 AM