Rate Watch
Mortgage Rates rise, after volatile week
This past week was extremely volatile. Mortgage rates bounced around like a Ping-Pong ball before finishing slightly up on the week. Oil prices continue to be the main contributor to volatility. In the first quarter of this year, the price per barrel of oil averaged $95 per barrel. Last week, the price per barrel of oil closed at $126 per barrel, (more than double the price from 12 months ago). It is an astonishing increase. With this astonishing increase comes astonishing uncertainty, and with uncertainty comes the volatility. Both the stock market and the bond markets remain very sensitive to even the slightest increase in Oil prices or other negative data.
Most of the other economic data points were positive for mortgage rates. The
Consumer Price Index (CPI) came in a little better than expected. CPI, the most widely followed inflation report, showed that seasonally adjusted prices rose only .2% over the month of April. Also, the
Retail Sales report showed a decline of .2 percent at the nation's cash registers. Unfortunately, neither of these economic readings were enough to push mortgage rates lower.
This morning, Bankrate.com’s
overnight average on the 30-year fixed rate mortgage averaged 5.76 percent, up from last Monday’s 5.69 percent. Other products followed. The 15-year fixed rate mortgage averaged 5.36 percent, up from 5.28 percent. And the 5-year Adjustable Rate Mortgage averaged 5.23 percent, up from last week’s 5.09 percent.
There will be 2 big events to watch on economic calendar this week. First, on Tuesday, the
Producer Price Index (PPI) will report on the nation’s wholesale inflation rate. PPI measures the average change in prices received by domestic producers for their goods. The second report to watch will be the
Federal Reserve Minutes to be released on Wednesday. The Fed Minutes is the actual written record from the most recent FOMC board meeting. The Minutes cover the discussions and debates amongst the FOMC board members, and they provide a valuable insight into the Fed's future policy objectives.
If either of these 2 reports increases the inflationary concerns of investors, then you can expect Mortgage rates to continue to rise. However, if it is shown that inflation is under control and the Fed Board members anticipate another rate cut, then you can expect rates may indeed fall. It could be an important week. However, as with last week, the markets will probably remain volatile. Borrowers should lock at their earliest opportunity.
Rate Watch
Mortgage Rates fall, as Oil prices skyrocket
If you haven’t heard yet, Oil prices are going up and they went way up last week. Oil futures finished the week at an astonishing $126 per barrel. Although we generally like high oil prices in Texas, high Oil prices are not good for the larger economy or your pocketbook. Rising Oil operates like a huge Tax on the American people. Since we need Oil to go about our daily lives, rising Oil prices divert money from productive investments to basic necessities. In other words, money that would otherwise go into a hot technology stock ends up in your gas tank.
Thankfully, last week’s sharp increase in Oil prices worked out pretty well for mortgage rates. As Oil hit ever higher record prices, the stock market made further declines. When stocks declined, bond prices rose as companies moved their money to less risky investments like mortgage bonds. As always, if mortgage bond prices rise, then mortgage rates fall.
Even though Oil prices helped mortgage rates in the short-term, the long-term implications of higher Oil prices will not be good. As the price of Oil moves higher, companies could begin to pass along those costs to their consumers. Higher prices lead to higher inflation. As we have stated many times before, inflation is a killer of a mortgage bond’s value.
According to Bankrate.com's overnight average, the 30-year fixed rate mortgage averaged 5.69 percent, down from last Monday's 5.77 percent. Other products followed. The 30-year fixed rate mortgage fell to 5.28 percent, down from 5.35 percent. And the 5-year Adjustable Rate mortgage fell 30 basis points to 5.03 percent, down from 5.33 percent.
Unlike last week, the economic calendar is jam packed with data and scheduled economic events. Two reports stand out above the rest: the Retail Sales report and the Consumer Price Index (CPI). The Retail Sales report, which will be released on Tuesday, adds up the nation's total in-store receipts, and CPI, scheduled for release on Wednesday, measures the average price level of goods and services purchased by consumers (i.e. inflation). Since consumers make up two-thirds of economic activity, these reports have added weight for investors.
Three other reports will be released, which may have an impact on mortgage rates. On Thursday, the Industrial Production report will measure the physical output of the nation's industrial sector. On Friday, the Housing Starts report will provide investors with some insight into the health of the residential construction industry. Also on Friday, the Consumer Sentiment report will measure the economic attitudes of the American consumer.
Mortgage rate performance will be very dependent on the data. If positive economic data or high inflation news surfaces, then mortgage rates will probably move higher. If the economy looks to be performing poorly or inflation shows signs of weakening, then rates will probably move lower. With so much uncertainty, it could be a volatile week. Borrowers should lock at their earliest opportunity.
For more information about rates, mortgages and the state of the real estate economy visit our Blog at
houstonratesheet.blogspot.com. Also, if you have any questions regarding the content of this newsletter or if you would like to cover these issues in greater detail, please don't hesitate to call or email. We want to make sure that you are well informed about these issues, and we would be happy to cover them for you or your organization.
Rate Watch
Despite a rocky week, Mortgage Rates fall
From the Fed announcement to the Employment Report, mortgage bond investors had plenty of information and data to dissect. The fun started on Wednesday with the
announcement from the Federal Reserve regarding a 25 basis point cut in the Federal Funds Rate. Although the 25 basis point cut was expected, the statement that followed was not expected. The Federal Reserve stated that they will continue to provide liquidity as needed and the board has no more concern regarding inflation than they had in March. Investors expected the Fed to take a tougher stand on inflation. This news provided a bounce to the stock market and mortgage rates moved higher as investors fled to find new stock market gains.
On Thursday, the Fed's favorite inflation report, the
Personal Consumption Expenditure (PCE) Index, was released. Inflation was only slightly higher than the Federal Reserve's target. This gave some credence to the Fed's statement. Although inflation appears high, it does appear that it has leveled off a bit. Mortgage rates began to fall on the news.
Finally, on Friday, the
Employment Report was released. As always, this report on the US Employment situation is the most widely followed economic report of the month. It can really change investor confidence. According to the report, the US economy lost 20,000 jobs in the month of April. However, the loss was not as significant as expected. Investors expected the economy to loose 70,000 jobs. So although the news was negative, it was taken as a positive development. This report coupled with
Gross Domestic Product (GDP) numbers, which showed positive growth in the 1st quarter, caused many to question all the recession talk. Mortgage rates immediately moved up on the news. However before the close on Friday, rates had fallen back down to pre-Friday levels.
This morning, Bankrate.com's
overnight average on the 30-year fixed rate mortgage fell to 5.77 percent, down from last week's 5.87 percent. Other mortgage products followed. The 15-year fixed rate mortgage fell to 5.35 percent, down from 5.47 percent. And the 5-year Adjustable Rate mortgage fell 5.39 percent, down from last Monday's 5.65 percent.
This week will be fairly slow on the economic data front. Stock market performance will take on a greater importance. If the stock market makes gains, investors may begin to take their money out of the bond markets and put their money into stocks. If not, rates may begin to fall. Borrowers should keep a close eye on the stock market.
Mortgage Rates rise, after volatile week
