Rate Watch
Last week, Freddie Mac's weekly survey was pretty flat. The benchmark 30-year fixed rate mortgage averaged 6.79 percent only up 1 basis point from the previous week. Other products were just as boring. Both the 15-year FRM and the One-year Treasury-indexed ARMs were up only 1 basis point as well. The 15-year averaged 6.44 percent while the One-year ARM averaged 5.83 percent.
One reason for the inactivity was the coming of the Employment report, which was released on Friday. This month’s report came in lower than expected with the economy creating 121,000 new jobs against a Wall Street consensus of 200,000. Accelerating job growth can lead to higher rates of inflation, which is bad for bonds. So, this is good news for mortgage investors even though we all like to see job creation in the economy.
Not all of the report’s news was good news for mortgage investors. Apparently, wage earners are making a good bit more money than they were in May. Average Hourly Earnings rose at a stronger than expected 3.9% annual rate, meaning that wages increased at their fastest pace in five years. This is fantastic news for workers, but not so good for bond holders and mortgage investors. Higher wages can lead to higher rates of inflation, which again is not good for bonds.
All and all it was a good week for mortgage rates. Bankrate.com's overnight average is down 1 basis point from the previous Monday. With not much on the economic calendar this week, the market should continue to be stable. Friday’s release of Retail Sales will be the most significant economic data. Consumers account for about 70% of economic activity, and this report is a major indicator of their economic health. The other important report will be the Trade Balance, but this information about the quantity of imports and exports mostly affects just the foreign exchange markets in the short term. Beyond these two reports, there will be lower tier economic data, Fed speakers, and record high oil prices to consider. It should be a safe week for borrowers; however, they should continue to lock interest rates as soon as possible.
posted by Vincent Biondillo @ 10:51 AM
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