Current Mortgage Interest Rates – Week of 10/15/12

Home loan rates stabilize in a new trading range after a 4 day sell off.  Despite tame inflation and QE3 Bond buying, interest rates fail to recover back to historic lows.  With a new trading trend emerging and a full week of economic releases, find out why you may need to lock in your interest rate before Friday.

What happened with mortgage interest rates last week?

Mortgage backed securities end the week roughly where it started, failing to break through resistance and re-establish a trading territory at the best levels for mortgage rates.  After opening the week lower and dropping for the 4th day in a row, mortgage bonds found support at the 25 day moving average.

Weekly Initial Jobless Claims were reported at their lowest level since 2008.  This encouraging news came after a report earlier this month that showed the Unemployment Rate dropped to its lowest level since early 2009.  Both reports show promise for employment, but may be a brief blip on the radar amongst a trend of otherwise stagnant growth.

The Mortgage Bonds continued to trend higher on Friday morning after the Core PPI came in within the Fed’s target range.  Core PPI is a wholesale inflation reading that will act as a barometer for the Fed and their ability continue stimulus and maintain a low rate environment.

It’s worth noting that Bonds have run out of steam the last 3 Fridays, causing rates to see a brief move higher.  With the Fed only purchasing a set amount of Bonds per week, once those allotted funds are gone, the Bond trading will be handled without interference in the open market.  When that’s happened to this point, Bonds have suffered.

What’s coming up this week on the economic calendar and what’s the impact on interest rates?

The economic calendar this week is packed with important data that could have an impact on Stocks and Bonds.  The inflation readings will start with tomorrow’s (10/16) release of the Consumer Price Index (CPI).  While the Core PPI released last week was tame, the CPI will be the first major inflation gauge since the Fed started into their QE3 printing/spending.

The economic reports continue on Wednesday with a projected increase in housing starts and building permits.  While the reading may not have a large impact on Bond prices, the reports are worth noting as we move further into the week.  Thursday will feature the release of more labor data with Initial Jobless Claims at 7:30 CT.  Most attention from bond traders will be placed on the Philly Fed Index at 9am CT.  The manufacturing report can have an impact on Stocks and Bonds as it helps forecast the upcoming release of the ISM Index.

Here’s our strategy for the days and weeks ahead…

With Bonds trading near support at the 25 day moving average, we are recommending our clients carefully float the market.  The support can help provide a worst-case-scenario with an opportunity to lock in the rate if pricing breaks through the resistance level.  However, Bonds are still trading near historic lows and the Fed has yet to show that their QE3 purchasing power has the ability to drive rates much lower.  Given that rates have suffered at the end of the last 3 weeks, our sentiment may shift towards a locking bias if Bonds fail to make any substantial move in our favor.

We maintain an ongoing dialogue with our clients about the market and interest rates throughout their financing experience so we can take advantage of the lowest rates when they present themselves. We all want the lowest rate, and the best way to ensure that you get the lowest rate, is to build a relationship with your mortgage planner, so they can best advise you on when to lock in your rate. Call us today for a complimentary mortgage review or Apply Online.