Houston's Rate Sheet

Rate Watch

Mortgage rates move up on inflation concerns

Another volatile week in the mortgage markets came to pass last week, and the volatility started real early. On Monday at 8am, it was shown that the Personal Consumption Expenditures (PCE) price index had risen .6% in the month of July. The figure was .1% higher than Wall Street Estimates. Inflation news is always bad news, and mortgage rates moved much higher on the news.

On Tuesday, the Federal Reserve made the announcement that it would keep their key interest rate unchanged. In the statement that followed the FOMC meeting, the Fed balanced their concerns regarding inflation and economic slowdown. The Fed did state that they expect inflation to moderate later in the year. Their prediction was timely. By Tuesday afternoon oil prices and commodity prices continued their descent. As of this morning, the price per barrel of oil had fallen below $114 for the first time since May. Rising Oil prices have been a major factor in rising inflation in the US.

After significant gains early in the week, mortgage rates began to moderate and slowly decline as the Oil prices fell. However, by weeks end, rates were still up on the week. This morning, Bankrate.com’s overnight average on the 30-year fixed rate mortgage came in at 6.43%, up from last Monday’s 6.31%. Other products followed. The 15-year fixed rate mortgage averaged 5.95%, up from 5.85%. And the 5-year Adjustable Rate Mortgage increased 4 basis points to 5.87%.

It is expected that this week will be just as volatile as last week. There are 2 big reports on this week’s calendar, the Retail Sales report and the Consumer Price Index (CPI). On Wednesday, the Retail Sales report will reveal the performance of the nation’s cash registers for July. Since, consumers make up two-thirds of economic activity, this report is a big indicator of economic health. On Thursday, the CPI report will report on consumer Inflation for July. As seen last week, inflation continues to be a big concern.

Mortgage markets continue to be very volatile. Borrowers should lock in their rates as soon as possible.

posted by Vincent Biondillo @ 3:32 PM 0 comments

Rate Watch

Despite better than expected Employment numbers, Mortgage rates fall

Good news is not always good news. Last week’s Employment Report was better than expected, but Wall Street investors didn’t take the news very well. The economy lost 50,000 jobs in the month of July, which was well under the 75,000 expected on Wall Street. Most of the job loss came from declines in the construction and manufacturing sectors. As a result of the losses, the rate of unemployment rose to 5.7%, the highest level since January 2004. The stock market was not very happy with the news, and mortgage rates fell thanks to the bad feelings.

As of this morning, Bankrate.com’s overnight average on the 30-year fixed rate mortgage fell to 6.31 percent, down from last Monday’s 6.41 percent. Other programs followed. The 15-year fixed rate mortgage fell 12 basis points to 5.85 percent, and the 5-year Adjustable Rate Mortgage (ARM) fell to 5.83 percent, down from last week’s 5.92 percent.

This week’s big news will be the Federal Reserve’s FOMC meeting. It is fully expected that the Fed will keep their key interest rate unchanged. Oil prices have fallen over the past couple of weeks, so the concerns regarding future inflation have subsided a bit. The statement to follow the Fed’s decision will probably have some weight. Most investors believe the Fed will keep rates unchanged until much later in the year.

It is hard to predict where rates might go after the meeting. If investors are convinced by the Fed that inflation concerns are subsiding, then mortgage rates could fall. As of this morning, inflation concerns were a little higher due to the results of the Personal Consumption Expenditure (PCE) price index. The July PCE price index came in at .8%, which was higher than the .5% May number. It was not well received by the markets, but mortgage rates are under control at the moment. Borrowers should probably lock at their earliest opportunity. Mortgage markets will more than likely be very volatile after the meeting.

posted by Vincent Biondillo @ 2:07 PM 0 comments