Mortgage Rate Update February 17, 2011

Although the best mortgage rates are unchanged this morning the closing costs required to obtain these rates are lower which means pricing has improved.

Despite economic data that would ordinarily pressure rates higher we are seeing pricing on rates improve.  Why?  A flight-to-safety trade is underway in response to growing unrest in other Middle East & North African Countries (Bahrain, Libya, Yemen, and more).  Potentially the toppling of power in Egypt could be the tip of the iceberg.

What is a flight-to-safety and how does it help mortgage rates here in the US?  CLICK HERE to learn more.

Not that the markets are paying any attention but this morning’s Consumer Price Index report showed growing price pressure for food & energy at the retail level of the economy.

According to this morning’s report inflationary pressure for consumers is not as hot as for manufacturers as shown in yesterday’s Producer Price Index.  This makes sense if you think about it.  During he Great Recession firms laid off workers and got much more efficient & productive.  As consumer demand rebounds their cost structures remain low which means they can absorb most of the inflation and remain profitable.  However, at some point they will begin rehiring workers (hopefully soon) which will raise costs and likely put more pressure on the CPI.

Inflation is the primary driver of mortgage rates so we’ll have to keep an eye out.

Current outlook: neutral