Mortgage Rate Update October 19, 2011

Although mortgage note rates are unchanged this morning.

Interest rates along with financial markets around the world continue to trade on rumors regarding the European debt crisis.  As I reported in yesterday’s ‘rate update’mortgage rates were headed lower when the trend fizzled on worse than expected inflation data.

Then, yesterday afternoon it actually looked like rates would completely reverse course and move higher after a newspaper in the UK published an article stating that the European bailout fund was going to be enhanced beyond expectations.  Yet we still have no facts.  It’s all speculation.

Here in the US, this mornings Consumer Price Index report from the Labor Department showed that inflation at the retail level of our economy has not increased as rapidly as prices at the wholesale level.  It’s likely that weak demand in our economy is forcing producers to shoulder the burden of higher costs of inputs.  No matter the underlying cause this mornings news is positive for mortgage rates.

In a separate report the Commerce Department released figures that showed home construction starts jumped sharply last month (up 15%!).  This has some analysts optimistic but the reality is that this is just one month and may be an outlier.

Despite volatility in the stock market mortgage rates have actually traded within a fairly tight range after moving off all-time low levels.  All eyes remain on Europe for direction.

Current Outlook: neutral