Boston Massachusetts Mortgage Rate Update 2 / 18

Mortgage Market

Mortgage Interest Rates are up .125% the past 48 hours and .25% on some mortgage products. I would expect to see worsening Mortgage Rates this afternoon as well. And possibly tomorrow. Yikes.

Economic Data

Thursday’s bond market has opened in negative territory again following stronger than expected inflation news. The bond market is currently down 9/32, which will likely push this morning’s mortgage rates higher by approximately .375 of a discount point.

The Labor Department reports that January’s Producer Price Index (PPI) rose 1.4% while the core data reading rose 0.3%. Both of these readings were well above forecasts, meaning inflationary pressures were stronger at the producer level of the economy than many had thought. This is certainly bad news for the bond market and mortgage rates because inflation erodes the value of a bond’s future fixed interest payments, making them less appealing to investors. They are then sold at a discount, leading to higher yields and rising mortgage rates.

Yesterday’s afternoon release of the FOMC meeting minutes didn’t reveal many surprises. The most notable was a minor upward revision of their expectation for this year’s unemployment rate. They also reiterated a prolonged period of high unemployment and slightly raised inflation targets for this year. But the news was not welcomed in the bond market and is likely contributing to today’s selling, especially after this morning’s stronger than expected inflation readings.

The Labor Department will be in the forefront again tomorrow when they post the more important Consumer Price Index (CPI) for January. This index measures inflationary pressures at the very important consumer level of the economy compared to today’s release that measured the producer level. With exception to maybe the Employment report, the CPI is the most important report that we see each month. Its results can have a huge impact on the financial markets, especially on long-term securities such as mortgage-related bonds. It is expected to show a 0.3% increase in the overall index and a 0.1% rise in the more important core data. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall. However, after today’s PPI results, traders may be skeptical of getting favorable results tomorrow.

Overall, the most important day of the week will likely be Friday/tomorrow with the CPI being released, but this week has been very active days for mortgage rates. In other words, be prepared for an active week or two in the markets and mortgage rates.

FLOAT or LOCK

If I was closing on a Home Mortgage in the next 0 to 15 Days – LOCK

If I was closing on a Home Mortgage in the next 15 to 30 Days – LOCK

If I was closing on a Home Mortgage in the next 30 to 60 Days - LOCK

If I was closing on a Home Mortgage in the next 60+ -LOCK

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.

bc@SmarterBorrowing.com 617.771.5021

Credit: Bloomberg, Yahoo Finance, Mortgage News, MBS Quoteline