Houston's Rate Sheet

Rate Watch

Last week, thanks to some very positive inflation news, mortgage rates continued to slide. Freddie Mac’s weekly survey resulted in an average 30-year fixed rate mortgage rate of 6.52 percent, down from the previous week’s 6.55 percent. The 15-year fixed rate mortgage remained unchanged at 6.20 percent, and the one-year Treasury-indexed ARMs averaged 5.65 percent, down from the previous week’s 5.69 percent.

The two big inflation reports were release last week, and both reports provided good news for borrowers. On Tuesday, the Producer Price Index provided the biggest jolt the markets. The report, which measures prices at the producer level, showed the core rate of inflation falling 0.03 percent. This decline held up against the consensus forecast, which predicted a .02% rise, helped spur the week long decline of mortgage rates. The rally was helped along on Wednesday with the release of the Consumer Price Index. CPI is the most closely watched measure of inflation, and it gave strong support to the Fed’s current policy course. Although, CPI did not drop as dramatically as PPI, it did fall short of the consensus forecast at 0.2 percent. Both reports showed inflation rates well within the Fed’s level of comfort. It appears that 17 consecutive rate hikes might have done their job to help curb inflation. Many investors have abandoned the possibility of another Fed rate hike this year.

This week’s economic calendar will be fairly light. Durable Orders on Thursday will be an important indicator of future economic activity. In the middle of the week, Existing Home Sales and New Home Sales will allow us some insight into the effects of lower rates. That’s just about all for the scheduled economic data. The situation in the Middle East or some other geopolitical issue could become a factor, but most signs point to a relatively quiet week ahead.

posted by Vincent Biondillo @ 2:19 PM