Rate Update for July 15, 2008
There are all sorts of things to talk about this morning.
First off, the stock market is trading lower this morning. The Dow Jones Industrial average is now down below 11,000. Fears over the financial sector continue to hurt stocks as confidence in the US Treasury’s plan to aid Fannie Mae and Freddie Mac is waning. Bad news for stocks is typically good news for mortgage rates. For an in depth look at the relationship between stocks and mortgage rates click here.
Despite the weakness in stocks mortgage rates may not benefit from the current financial environment. Inflation is showing its ugly head once again in today’s Producer Price Index Report (PPI). The PPI reports on inflation at the wholesale and manufacturing level of our economy. This morning’s report indicated that prices year-over-year increased by a whopping 9.2%, the most since June of 1981!
Furthermore, in testimony on Capitol Hill, Fed Chairman Ben Bernanke said the US Economy faces, “numerous difficulties” and gave an uncertain outlook on inflation.
All in all, the news isn’t pretty. We are going to recommend that our clients with near-term closing lock in if they haven’t already. Longer-term closing may be able to be patient and see lower rates in the next few weeks.