Mortgage Rate Update August 17, 2011

Mortgage rates are better this morning.

The see-saw that is the financial markets over the past week continues this AM.  Yesterday stocks declined which helped mortgage rates to improve.  This morning stocks are higher so we’ll have to see if rates can maintain these levels.  Tomorrow?  We’ll have to wait and see but I’m guessing it will be the opposite of what takes place today.

One of the main drivers in the current dip in interest rates is the speculation that the Fed will engage in a 3rd round of quantitative easing.  This is when the Fed steps in and buys large quantities of US Treasury securities which drives yields lower.  The market has already priced in this possibility.

The Labor Department reported that the Producer Price Index came in at the high end of the Fed’s target range.  Inflation is the primary driver of mortgage rates so this mornings report is a little concerning.

Current Outlook:  locking bias