Understanding Mortgage Rates | dripp inc | Home Equity | Refinancing and Remortgage Guide

Good Afternoon…

…And what a fine afternoon it is! The sun is shining, finally, and the 10-year bond yield is down again. Take advantage of the mortgage rates today because there is a report coming out tomorrow that could shock them right back up again.

Here’s the inside Dripp…

There are no relevant reports coming out today that can affect rates, so Friday’s bond market strength carried over, which means rates will at least stay the same or improve today. What usually happens on a Monday following a strong bond performance from the preceding Friday is a sell off in bonds to capitalize on the gains, but the use of traditional economic “foreshowing” techniques have not been in play the last few months. Welcome to the unknown! We will do our best at Drippinc to help you make sense of all this. Right now, we suggest locking in your interest rates because we have been seeing the recent strength of bonds have a very little effect on them. This is most likely due to Fannie’s statement that fees and rates will be increased due to the losses from all the defaulted loans.

Here is the news to look for throughout the week:

-Tuesday – July’s Producer Price Index (PPI): Inflationary pressures are measured at the producer’s level through this index, which is why this the most important report for this week. Keep an eye on the “core” data: if it shows prices rising rapidly, bond prices may go down and interest rates will continue to go up. A large increase implies inflation is a real threat to the economy because the higher prices will likely be passed on to the consumer.
- Consensus (PPI – M/M change: 0.5%)
- Consensus (PPI less food and energy: 0.2%)

-Thursday – Leading Economic Indicators (LEI): This is an important index because it tries to measure economic activity for the next three to six months. As with most reports, if the actual reading is higher than expected, meaning economic activity will increase, rates will most likely go up. If the report falls short of forecasts, then we should see them decrease.
- Consensus (-0.2%)

This should be in a very interesting week because when there are not many reports on the agenda, there is the potential of a lot of volatility.

Simply Put: Rates remained at Friday’s levels today with a very slight improvement. There is not much news coming out this week and when this is the case we usually see a lot of volatility in the market. Hot topics for the week included inflation and economic forecasts. If you are refinancing or purchasing a home stay alert this week and check back for updates. As things stand right now, the 10-year bond yield has been going down since early last week, but rates have not been falling as quickly. There is the chance that they can improve this week, but with this increasingly growing spread it doesn’t seem to be helping as much.