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Providing
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 Here are the rest of the last week's comments and the days that affected rates most lately....... PPI follows the lead of last week's CPI with highest reading in 25 years..... October 18 The Week in Review - The buzzword is Inflation.... October 9 Hold on to your Hats, rates will be going up..... October 3 Greenspan worries about "exotic" mortgage instruments..... September 26 |
The Week in Review..... October 24 10:08 AM EST For the first time since Katrina hit New Orleans, mortgage rates did not rise from a Friday to Friday, thanks to a rally in the market on Friday October 21st. This settle rates back in at about 6% with no points and the opportunity to still buy a rate at 5.875% for a half a point here at Daily Interest. (These rates are for borrowers with excellent credit and mortgage loans of 80% or less LTV.) The National rates from Freddie Mac came in at 6.10% (paying 1/2 point) for a 30 year fixed rate mortgage, recording the highest rates since July 1, 2004 and nearly half a percent higher than rates one year ago, which were at 5.69% paying a half a point. The biggest news of last week was certainly the PPI and producers reported the largest increase in prices in the last 25 years, which was in line with the CPI increase the week before. Similar to the CPI, increases in the PPI were largely due to increases in energy costs and these higher prices for fuel have yet to pass into the rest of the economy as core prices were still showing a small inflationary effect. What does this tell us? Well, as one reporter stated, if you don't drive anywhere or eat, you won't notice any inflation at all. Unfortunately, there are not many of us that are in position to be able to do that! The remainder of the week was fairly quiet on the mortgage rate front and actually gave us the opportunity to see the rates drop on late Friday to result in the steady rates that we had for the week. On the forefront, the question is whether rates drop back below 6% or continue to climb adn as I have been pointing out recently, most indicators point that this is the time that rates will stay above the 6% level. Of course, this is the 3rd time since July of 2003 that the bond market has tested the 4.5% mark and retreated back below that mark, so the market could certainly surprise us one more time. The difference this time though is that the Fed is actively raising rates, which they were not doing the last two times. The intention of the Fed seems to be to continue to raise the Fed rate and this can only put pressure on long term rates to rise along with the Fed rate. Given that most predctions indicate the Fed coming through with 3 more 1/4 point increases before stepping back, this certainly points toward the 30 year fixed also increaseing 3/4% along with these Fed rate hikes. The upcoming week has very little on the schedule and rates will likely be steady for the week. Have a great day..........Scott Updated Forecasts This continuing trend of higher and higher rates has caused me to change the rate lock advisory to lock for all four stages. In addition, I have updated my forecast to show rising rates for the second half of 2005. This is a combination of what we have seen in both the market and the economic reports over the last 3 months and the continued tendencies of the market to shoot higher of very little good news. Now, on the bright side, the global economy is still going nowhere. We have quite a quandary where if the market does not rise in response to continued increases by the Fed we could see an inverted rate curve due to the global pressures. This is still a very good possibility and should we see anything close to an inversion, rates could drop quickly. The very high number of mortgages that are ARM's vs Fixed rates would switch in a heartbeat if you can get a 30 year fixed at a lower rate than a 5 year ARM!! If this fine line were to get crossed, you can throw all the forecasts of higher rates right out the window. Where are rates headed in the next 3 months? It looks like the trend will be heading steady or higher with new projections out and the higher oil prices and Fed rate increases driving rates over the next 3 months The September Fed Meeting You can read the Fed's statement on the Board of Governor's Federal Reserve website for yourself. For the 11th straight time, the Fed has increased the Federal funds rate, citing inflationary pressures from energy prices as the reasoning in raising rates one more time. The Fed did make a point of stating that in the long term, inflation was under control. Where are rates going this year? The entire first part of the year, I have been sticking with the experts position that for the year of 2005, we can expect to see mortgage rates to level out in the 6.5% to 6.75% range for a 30 year fixed rate mortgage by the end of the year. Although this forecast has been the same for the last 3 years and has yet to materialize, this long term forecast must be still taken into account. My personal expectations are that 30 year rates will be rising for the second half of 2005 barring any more terrorist attacks. If I were financing/refinancing a home . . . . I would Lock if my closing was within 10 days I would Lock if my closing was 11- 30 days away I would Lock if my closing was 31 - 45 days away I would Lock if my closing was more than 45 days away *As always, this commentary is only my personal opinion if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any/all other borrowers.
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