Mortgage Rate Update May 16, 2013

Mortgage rates are unchanged this morning.  Weaker than expected economic news and technical trading signals is helping mortgage rates to reverse course.

The Labor Department reported this morning that prices at the retail level of our economy fell from last month.  The bottom line is that despite the Fed’s quantitative easing policy, which injects $85 billion per month  in money supply into the economy, inflationary pressure remains low.  Since inflation expectations are the primary driver of long-term interest rates this is a good sign for rates.

Also helping mortgage rates remain low this morning is the weekly jobless claims report which showed that the number of people filing for unemployment benefits increased by the largest margin since November of 2012.  Bad news for the economy is often good news for mortgage rates.

From a technical standpoint the chart below demonstrates very clearly that for most of the past 12 months the US 10-year treasury yield has traded within the range of 1.60%-2.00% (mortgage rates tend to track the US 10-year treasury yield).  Since reaching ~2.0% on Tuesday the yield appears to be reversing lower so I will recommend floating your rate today.

Current Outlook: floating