Our Real Estate Blog

Mortgage Rates (9/16/2010)

September 20th, 2010 9:39 AM by Lehel S.

Thursday's bond market has opened in negative territory following stronger than expected economic news. The stock markets have had little reaction to the data with the Dow down 8 points and the Nasdaq down 3 points. The bond market is currently down 10/32, which should push this morning's mortgage rates higher by approximately .125 - .250 of a discount. 

The Labor Department gave us two pieces of economic data this morning. The first was much more important to the markets and mortgage rates than the second was. This was August's Producer Price Index (PPI). It came in with an increase of 0.4% in the overall reading and a 0.1% increase in the core data. Analysts were expecting a 0.3% rise in the overall reading, meaning prices rose more than thought last month. However, the more important core data reading pegged forecasts with a 0.1% increase. Therefore, this data can be considered neutral to slightly negative for bonds and mortgage rates.

La st week's unemployment figures were also posted this morning. The Labor Department reported that 450,000 new claims for unemployment benefits were filed last week. This was below forecasts, giving a slight hint of strength in the labor market. This is also negative news for bonds, but since the data tracks only a single week's worth of new claims, its impact on rates has been fairly minimal.

Tomorrow also has two reports scheduled, and as with today, one of them is much more important than the other. The first is August's Consumer Price Index (CPI) during early morning hours. The CPI is one of the most important reports we see each month. It is considered to be a key indicator of inflation at the consumer level of the economy. Just like today's report, there are two readings tomorrow- the overall index and the core data reading. Current forecasts show a 0.2% increase in the overall reading and a 0.1% rise in the core data reading. As with the PPI, a larger incr ease in the core data would likely lead to higher mortgage rates. 

The second report of the day and last of the week will be posted by the University of Michigan during late morning trading. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which hints at consumers' willingness to spend. If confidence is rising, consumers are more apt to make large purchases. But, if they are growing more concerned of their personal financial situations, they probably will delay making that large purchase. This influences future consumer spending data and can impact the financial markets. It is expected to show a reading of 70.0, which would mean confidence rose from August's level. That would be considered bad news for bonds and mortgage rates, but the CPI is much more important to the markets than this data is. Therefore, expect to see the CPI results drive the markets and mortgage pricing much more than this data.

If I were consider ing 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 September 20th, 2010 9:39 AM

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