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Mortgage Rates (9/13/2009 - The Week Ahead)

September 14th, 2009 6:29 AM by Lehel Szucs

This week brings us the release of five relevant economic reports that may influence mortgage rates. A couple of these reports are considered to be highly important to the financial and mortgage markets, meaning that we may see significant changes to rates this week. There is a very good chance of seeing noticeable changes in rates at least one day, if not several days this week. There is no relevant news scheduled to be posted tomorrow, so look for the stock markets to be the biggest force behind bond trading and changes to mortgage rates until we get to the data releases.

There are two highly important reports scheduled to be posted early Tuesday morning. The first is the release of August's Retail Sales report. It will give us a measurement of consumer spending, which is very important to the markets because consumer spending makes up two-thirds of the U.S. economy. Current forecasts are calling for a 1.9% increase in sales. The sizable jump is expected to come from auto sales that were fueled by the Cash For Clunkers program. Analysts are calling for a 0.4% rise in sales if auto sales are excluded. A larger than expected increase would be considered bad news for bonds and likely lead to an increase in mortgage pricing.

The second important piece of data Tuesday morning is the release of August's Producer Price Index (PPI). This report will give us a very important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. Analysts are currently predicting a 08% increase in the overall index, and a rise of 0.1% in the core data. Stronger than expected readings could fuel inflation concerns in the bond market and lead to an increase in mortgage rates Tuesday morning. Both of th e day's reports are considered to be extremely important to the markets and mortgage rates.

August's Consumer Price Index (CPI) will be released Wednesday morning. The CPI is one of the most important reports we see each and every month. It is considered to be a key indicator of inflation at the consumer level of the economy. As with its sister PPI report, there are two readings in the report- the overall index and the core data reading. Current forecasts are calling for a 0.3% increase in the overall reading and a 0.1% rise in the core data reading. A larger increase in the core data would likely lead to higher mortgage rates Wednesday morning.



Also scheduled for Wednesday morning is August's Industrial Production data. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important but could help change mortgage rates if there is a significant difference between forecasts and the actual reading. Analysts are currently expecting to see a 0.7% increase in production. A higher level of output could lead to higher mortgage rates, while a weaker than expected figure would be considered good news for bonds and rates.

August's Housing Starts report will be posted early Thursday morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand, but is usually considered to be of low importance to the financial markets. It is expected to show little change between July's and August's starts.

Overall, I think we need to label Tuesday as the most important day of the week with the Retail Sales and PPI reports both being posted that day. However, Wednesday's CPI release is also extremely important to the markets, so Wednesday cannot be ignored either. Monday or Friday wil l probably end up being the calmest days, but we still may see minor changes to rates those days. But we could see a significant change to rates this week if the major reports vary greatly from forecasts.

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.

©Mortgage Commentary 2009

Posted in:General
Posted by Lehel Szucs on September 14th, 2009 6:29 AM



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