Tuesday, August 18, 2015 - Article by: James Brooks - Polaris Home Funding Corp -
By James Brooks
The bond market is down 54/32 (2.18%), which should push today's mortgage rates higher by approximately .125 of a discount point.
The Commerce Department announced early this morning that new home groundbreakings rose last month to their highest level since October 2007. The increase was only 0.2% from June, but a sizable upward revision to June's starts allowed the small increase to reach that level. Because most of the surprise came from June's data, the impact on today's bond trading and mortgage pricing has been limited. However, the data is still bad news for mortgage rates because it points toward a strengthening housing sector.
Tomorrow is the key day of the week. July's Consumer Price Index (CPI) will be posted at 8:30 AM ET tomorrow morning. The CPI is one of the most important reports we see each month as it measures inflation at the consumer level of the economy. As with last week's Producer Price Index, there are also two readings in the report. Analysts were expecting to see a 0.2% increase in the overall index and a 0.2% rise in the core data reading. Declines in the readings, especially in the core data, should lead to lower mortgage rates since it would mean inflation is still not a threat to the economy and a Fed rate hike may come later than sooner. On the other hand, stronger than expected readings will likely lead to an increase in mortgage pricing tomorrow.
We will also get the minutes from the last FOMC meeting tomorrow. There is a pretty good possibility of the markets reacting to them following their release. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy, economic growth and the Fed's plans for raising short-term interest rates. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading. This is one of those events that can cause significant movement in rates after its release or be a non-factor, so be prepared for a move, but not surprised if the impact on rates is minimal.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now.
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