CPI

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

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.

CPI

What’s Ahead for Mortgage Rates This Week: May 17th

Mortgage markets improved last week — but barely — as ongoing doubt surrounding the health of Greece and the Euro pushed additional investors into safe assets, including mortgage bonds. 

Mortgage rates were wildly volatile between Monday and Friday before closing the week slightly better than their best levels of the year.

It’s the 3rd straight week in which mortgage rates improved but that doesn’t necessarily mean the trend for lower rates will continue. The last two times mortgage rates teased these levels, they immediately spiked higher.

It happened once in February 2010, and again, 4 weeks later in March.

This week, the same could happen.  After a week-and-a-half without much data of consequence, the newswires will be on overtime.

The first release to watch is Monday’s National Association of Home Builder’s Housing Market Index.  It’s not a “mainstream” release, per se, but the index gives some insight into how homebuilders are feeling about the economy and homebuilders are on the frontlines of the housing market. The stronger the report, the worse it should be for mortgage rates going forward.

The same goes for Tuesday’s Housing Starts and Building Permits numbers.

Also on Tuesday, the government releases the Producer Price Index. The Producer Price Index is like a “cost of living” report for U.S. businesses — it measures the change in operating cost from mont-to-month and from year-to-year.

PPI is viewed as a precursor to inflation and inflation is bad for mortgage rates. Therefore, if the Producer Price Index reads higher-than-expected, mortgage rates will rise. If PPI is in-line, rates in Indiana should hold steady.

Then, on Wednesday, the Consumer Price Index is released. Again, if costs are rising, mortgage rates will likely follow.

The week closes with the release of the Federal Reserve’s minutes from its last meeting in April and the jobs figures.  All in all, a busy week of data and mortgage rates could change by a lot.

If you’re still shopping for the market bottom, luck’s been on your side but there’s a point when it’s best to just lock in.  This week may be that point.

Talk to your loan officer about today’s market and make yourself a game plan for locking a rate. Rates have never stayed this low, for this long, and this week doesn’t figure to be much different.