Mortgage Rate Update August 14, 2014

Mortgage rates are very close to the best levels of the year.

For weeks now I have been writing that domestically the US economy appears to be fairly healthy and if it weren’t for international story lines US mortgage rates would likely be higher.  Today is a perfect microcosm of this theme.

Earlier today weekly jobless claims were reported slightly higher than expectations but not enough to significantly move the 4-week moving average which remains below 300,000.  By all accounts the US Labor Market is continuing to improve.  Tomorrow we’ll see the latest reading of the Producer Price Index (PPI).  If inflationary pressure continues to rend higher it would ultimately be a bad sign for mortgage rates.

The financial markets are mainly focused on Europe this morning.

It was reported that the German economy slowed in the 2nd quarter which is a worrisome sign for the region (Germany is Europe’s main economic driver).  The German 10-year bund yield (equivalent of US 10-year treasury note) fell to 1.01% on the release of the news (US 10-year i currently 2.41%).  Are we in store for a global flight to quality?  IF so, we may see conventional 30-year fixed mortgage rates drop below 4.00% in the coming weeks/ months.

I will shift to a floating bias.

Current Outlook: floating