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.
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.
posted by Vincent Biondillo @ 3:25 PM
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