Rate Update August 17, 2010

Mortgage rates will start the day modestly worse compared to yesterday.

Better than expected economic data is pressuring interest rates higher this morning.  The Federal Reserve reported that industrial production and capacity utilization were better than expected for the month of July.

In a separate report the Commerce Department reported that housing starts came in higher than expected in July.  Most analysts believe that a rebound in the housing industry is the key to a sustainable recovery so this news is welcomed by the markets.

Lastly, the Labor Department reported that prices at the wholesale level of the economy increased by more than expected last month.  Inflation is the primary driver of interest rates and although it remains tepid last months increase is pressuring the markets.

All together these reports have brought temporary optimism to the battered economic outlook.  Although we may see rates move higher today I still believe lower yields are on the longer-term horizon.

Current outlook: floating long-term