Our Real Estate Blog

Mortgage Rates (12/13/2010)

December 13th, 2010 10:00 PM by Lehel S.

Monday’s bond market has opened relatively flat despite early stock gains. The stock markets are opening the week with gains of 34 points in the Dow and 2 points in the Nasdaq. The bond market is nearly unchanged from Friday’s closing level, but we will still likely see an increase of approximately .250 of a discount point in this morning’s rates due to weakness late Friday.

There is no relevant economic data scheduled for release today, but the rest of the week is fairly busy. Between tomorrow and Friday, we will see six reports released that have the potential to influence mortgage rates in addition to the last Federal Open Market Committee (FOMC) meeting of the year. Since none of them are coming today, we can expect the stock markets to drive bond trading and mortgage rates again. 

Tomorrow has two of the more important reports of the week with November's Retail Sales report and Producer Price Index (PPI). The Retail Sales report tracks retail level sales and is very important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. Current forecasts call for it to show a 0.5% increase in sales from October’s levels. If it reveals weaker than expected sales, the bond market should thrive and mortgage rates should fall as a result. A stronger than expected reading would indicate economic growth, leading to stock market gains and higher mortgage rates tomorrow. 

November’s Producer Price Index (PPI) will also be posted early tomorrow. It measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If this report reveals stronger than expected readings, indi cating that inflationary pressures are rising, the bond market will probably react negatively and drive mortgage rates higher. If we see in-line or weaker than expected numbers, the bond market should fair well and mortgage rates should fall. Current forecasts are showing a 0.5% increase in the overall index and a 0.2% rise in the core data.

The last FOMC meeting of the year is taking place tomorrow, adjourning at 2:15 PM ET. There is not much debate about what the Fed will do at this meeting with no chance of them raising key short-term interest rates. Therefore, the post meeting statement will likely be the sole source of a market reaction. This statement has the potential to have a significant influence on the markets and mortgage rates as investors look for any indication of what and when the Fed may do next. We are hoping that Mr. Bernanke and friends will take the opportunity to remind the markets that the economy still has significant hurdles to overcome and that inflation is still not a concern. A properly worded post-meeting statement could cause stock selling and an improvement in bond prices, leading to improvements to mortgage rates tomorrow afternoon.

Overall, expect to see yet another volatile week in the financial markets and mortgage pricing. The most important day of the week is either tomorrow or Wednesday due to the reports being posted those days and the FOMC meeting scheduled. Please maintain contact with your mortgage professional if you have not locked an interest rate yet because we may see sizable changes to mortgage pricing more than one day this week.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers. 
Posted in:General
Posted by Lehel S. on December 13th, 2010 10:00 PM

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