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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