Our Real Estate Blog

Mortgage Rates (8/17/2010)

August 17th, 2010 5:23 PM by Lehel S.

Tuesday's bond market has opened in negative territory after the two more important economic reports of the morning revealed stronger than expected results. The stock markets are reacting favorably to the news with the Dow up 54 points and the Nasdaq up 20 points. The bond market is currently down 13/32, which will likely push this morning's mortgage rates higher by approximately .125 of a discount point.

The first of this morning's three reports was July's Producer Price Index (PPI). The Labor Department said that the overall PPI rose 0.2% last month, as it was expected to. The bad news came in the more important core data reading that rose 0.3% when forecasts had called for only a 0.1% rise. This means that prices at the producer level of the economy rose more than expected when volatile food and energy costs are excluded. The larger than expected increase indicates that inflation was stronger than thought at the producer level. The concern is that th ose costs will be passed onto the consumer in the near future, fueling inflation at the consumer level of the economy.

July's Housing Starts was also posted early this morning, but it gave us favorable results. The Commerce Department said that starts of new home construction rose last month, but the number of units was fewer than analysts had forecasted. This means that new home construction strengthened slightly last month, but at a slower pace than thought. Unfortunately, the other two reports of the morning were much more important to the markets than this was. Therefore, it has had a minimal impact on today's mortgage rates.

The final report of the morning was July's Industrial Production. It revealed an increase of 1.0% in output at U.S. factories, mines and utilities. This was a much stronger than the 0.6% increase that was expected and means that manufacturing activity was stronger than thought last month. That news is considered negative for bonds and mortgage rates because a strengthening manufacturing sector makes a broader economic recovery more likely.

There is no relevant economic data scheduled for release tomorrow, so look for the stock markets to have the biggest influence on bond trading and mortgage pricing. I would not be surprised to see further gains in the major stock indexes, so please proceed cautiously if still floating an interest rate.

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... Lock 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 August 17th, 2010 5:23 PM



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