Our Real Estate Blog

Mortgage Rates (6/15/2010)

June 15th, 2010 11:52 AM by Lehel S.

Tuesday's bond market has opened flat despite early stock gains. The stock markets are showing strength with the Dow up 93 points and the Nasdaq up 29 points. The bond market is currently unchanged, which should keep this morning's mortgage rates near yesterday's level.

There is no relevant economic data being posted today, but tomorrow makes up for yesterday and today with three relevant reports scheduled for release. The first is May's Housing Starts that tracks starts of new home projects. It is the week's least important report and likely will not affect mortgage rates unless its results vary greatly from the 2.5% decline in starts that are expected.

The second is one of the two highly important reports of the week. May's Producer Price Index (PPI) will also be posted early tomorrow morning. It helps us measure inflationary pressures at the producer level of the economy. There are two readings of this index, the overall and the core data. The core data is considered to be the more important of the two because it excludes more volatile food and energy prices. A large increase could raise concern about inflation rising as soon as the economy gains some traction. This would not be good news for bond prices or mortgage rates since inflation erodes the value of a bond's future fixed interest payments. Rising inflation causes investors to sell bonds, driving prices lower and mortgage rates higher. Analysts are expecting to see a decline of 0.5% in the overall index and a 0.1% rise in the core data. It will not take much of a variance from forecasts for the markets to react, which would most likely lead to changes in mortgage rates. 

The third and final piece of data scheduled for tomorrow is May's Industrial Production. This report will be released at 9:15 AM ET and is considered to be moderately important. It measures output at U.S. factories, mines and utilities, giving us a fairly important measurement o f manufacturing sector strength. If it reveals that production is rising, concerns of manufacturing strength may come into play in the bond market. A larger than expected 0.8% increase would indicate that the manufacturing sector is stronger than expected and would likely help push mortgage rates higher. That is assuming that the PPI doesn't surprise us.

With these three reports being posted tomorrow, there is a pretty good possibility of seeing changes to mortgage rates. The stock markets will also influence trading and mortgage rates, but I am expecting tomorrow's data to have more of an impact on rates than many recent reports have.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock 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 opi nion 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 June 15th, 2010 11:52 AM

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