This Week In Mortgage News
Monday, July 21st, 2008This week will be interesting for the bond market and mortgage rates. There are five remaining economic reports scheduled for release, but only one of them is considered to be of high importance to the markets. With data being posted all but one day of the week, we may see some noticeable fluctuations from day to day in mortgage pricing. Generally speaking, despite the lack of a data-packed calendar, I would still maintain constant contact with your mortgage professional.
Interest rates remained volatile last week as worries about inflation continued to influence the mortgage market. Comments from the Federal Reserve indicated that the current rate of inflation is above desired levels. When the Fed is concerned about inflation, they tend to raise interest rates. We recommend locking now before they go up.
Inflation data continues to hammer headlines and our wallets. News this week demonstrated what we have all been feeling; prices are higher at the pump, the grocery store and anywhere else you use your debit card. Interest rates trade off of bond prices and bonds HATE inflation. Coupled with this is concern about a declining economy which could hold rates back a bit, but the overall trend is higher for those seeking a mortgage in coming months.
Volatility being what it is these days, mortgage rates bounce around a lot. Upward pressure for rates one day gives way to downward pressure the next, only to succumb to upward pressure again.
The see saw between concerns about growth and fears about inflation tilted toward the inflation side again this week, after Fed Chairman Ben Bernanke addressed Congress in the semi-annual report on monetary policy. While detailing the challenges facing the economy, Bernanke noted that inflation was above desired levels and that upside risks for higher prices have “intensified” lately. A Fed seeing higher inflation usually can be expected to react with an upward move to the Fed Funds and Discount Rates at some point in the not-too-distant future. In fact, the Federal Reserve Open Market Committee explicitly noted at its last meeting that “with increased upside risks to inflation and inflation expectations, members believed that the next change in the stance of policy could well be an increase in the funds rate.”