Mortgage Rate Update October 18, 2011

Although mortgage note rates are mostly unchanged the accompanying closing costs are lower so mortgage rates in general are better today.

We shifted to a floating position yesterday on news that a German official had warned that a “grand plan” expected to come out of this Sunday’s meeting amongst European leaders was unlikely to create immediate relief.  On this news it appeared that sentiment had shifted in a direction favorable for interest rates.

Indeed pricing on mortgage rates improved yesterday but that momentum has been interrupted this morning by worse than expected inflation numbers.  The Labor Department reported earlier that prices at the wholesale level of our economy rose by a much faster clip than was expected.  Since inflation is the primary driver of interest rates this is unfriendly news.  Tomorrow we’ll get to see if wholesalers have been able to pass along price increases to consumers when the Consumer Price Index is released.

In housing news, this morning’s index on home builder sentiment released by the National Association of Home Builders hit the highest level since May 2010 but still remains at a historically low level.

Current Outlook: floating