Market Overview, Weekly Review

What’s Ahead for Mortgage Rates This Week: July 11th

July 12, 2010 by · Leave a Comment 

The Lighter or Heavier Side Of Inflation by barnumc1 | Flickr.com

Mortgage markets improved again last week — if only barely — throughout a holiday-shortened week devoid of “major” data and market conviction.

Up-and-down trading characterized the week which ended with Illinois mortgage rates slightly lower versus the week prior.

Mortgage rates have fallen in 4 consecutive weeks and are on an extended rally that dates back to mid-April.

This week, however, data returns and rates could reverse. Especially with inflation numbers in play.

Inflation is the enemy of mortgage rates.

Inflation is bad for mortgage rates because mortgage rates are based on the price of mortgage-backed bonds.  When inflation pressures mount, the demand for mortgage-backed bonds wanes and that pushes bond prices down which, in turn, pushed bond yields (i.e. rates) up.

There’s three pieces of inflation-related news this week.

The first inflation-related story is the Federal Reserve’s Wednesday release of the minutes from its last meeting. When the Fed adjourned June 23, it said “underlying inflation has trended lower“. There is definitely more to the conversation than what the FOMC released in its post-meeting statement. 

Markets will be looking for clues.

On Thursday, the Producer Price Index is released. The Producer Price Index is a measure of business operating costs. When PPI is increasing, it means that “doing business” is more expensive — an inflationary situation. It’s inflationary because higher business costs are often absorbed by consumers in the form of higher prices for goods and services.

A rising PPI is usually bad for mortgage rates.

And lastly, the Consumer Price Index will be released on Friday. The CPI measures the average American’s “cost of living”. Like PPI, when the Consumer Price Index is rising, mortgage rates tend to follow.

Other releases of importance this week include Retail Sales and two consumer confidence surveys.

Last week, mortgage rates again made new all-time lows. If you haven’t checked with your loan officer about the possibility of a refinance, make that call this week.  Mortgage rates can stay low for a long time, but they can’t stay low forever. Lock your rate while you can.

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James K Barath, CMPS®

James K Barath is a Certified Mortgage Planning Specialist®, Certified FICO® Professional, Certified Military Housing Specialist® and your FHA Home Loan Expert. He is also a graduate of Purdue University, The CMPS Institute, Dale Carnegie Human Relations Course & Napoleon Hill Foundation's PMA Science of Success Class. It's your home and your future. It's his profession and his passion. He is ready to work for your best interest. Contact James for your FREE Home Loan Approval !  His Motto: I Facilitate the American Dream Through Responsible Mortgage Lending and Financial Literacy!

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