Mortgage Rate Update June 26, 2014

Mortgage rates are priced slightly better from earlier in the week (note rates are unchanged).

In case you missed it yesterday’s Gross Domestic Product (GDP) release was a stinker.  The report from the Department of Commerce showed that the US economy contracted at a 2.9% annualized pace during the first quarter.  Of course analysts are blaming the bad weather but regardless the report will make it difficult for the US economy to achieve significant growth in 2014.  Bad news for the economy is good news for mortgage rates.

Also out yesterday was the report on durable goods for May 2014.  It showed that orders for goods lasting more than one year contracted in May.  Interestingly enough, MBShighway.com supplied this chart to its members and I thought I would pass it along.  It shows a pretty strong correlation between durable goods orders and the S&P 500 stock index going back to the 1990s.

If this correlation holds in the future we’d expect stock prices to fall and/ or durable goods orders to rise.  If stocks do decline it could help mortgage rates move lower.

The Department of Commerce was back at it this morning releasing the monthly personal income and spending report.  The Fed’s favorite gauge of inflation (Personal Consumption Expenditure Price Index) showed that prices rose by ~1.8% on a year-over-year basis.  Although below the Fed’s target of 2.0% this number is trending higher and inflation is bad news for mortgage rates.

From a technical perspective we can still afford to float but if this rally loses steam I may shift to locking tomorrow.

Current Outlook: floating