Houston's Rate Sheet

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.

posted by Vincent Biondillo @ 3:59 PM