According to Labor Department figures released this morning consumer prices fell in November for the first time in six months, pointing to muted inflation pressures that should allow the Federal Reserve to maintain their mortgage-interest rate friendly monetary policy strategy for the foreseeable future.

The November Consumer Price Index dropped 0.3% last month on the back of sharply lower gasoline prices.  The so called core consumer price index, a value which excludes food and energy prices, edged up 0.1% after rising 0.2% in October.

Looking ahead to the coming week – Uncle Sam will dominate the pre-holiday credit market with a three-part auction featuring $35 billion of 2-year notes on Monday, $35 billion of 5-year notes on Tuesday and $29 billion of 7-year notes on Wednesday.  $99 billion is a lot of supply landing at year-end – a condition that may cause investors to be Scrooge like and drive prices lower (yields higher) at this week’s debt sale.  If so, a series of soft Treasury auctions will not likely have much impact on the current level of mortgage interest rates – but mortgage investors will likely be more stingy than usual with the prices they are offering.

November Existing Home Sales figures on Thursday will highlight an otherwise sparsely populated economic calendar.

Economic data may cause a temporary little flutter in the market – but any substantial shift in the current trend trajectory of mortgage interest rates will almost certainly be tied to events surrounding the looming “fiscal cliff”.

A resolution of the issue by Christmas, a week before the deadline, remains uncertain but not out of the question.  Bear-in-mind that if/when a political compromise is reached to avoid the “fiscal cliff” — stocks will likely rally at the expense of rising mortgage interest rates (as long as the deal is something more than a simple extension of the current deadline).  Until/unless a fiscal agreement is achieved – a primary support for steady to perhaps fractionally lower mortgage interest rates will remain firmly in place.

 

Mortgage Rates as of December 14, 2012 ( purchase transactions )

30 day rate locks, subject to credit score and loan to value edits

FHA

30 year fixed                  3.00%

Conventional

30 year fixed rate           3.25%    (*LTV and credit score could impact this quote)  ( .50 origination fee, 760+ score)

15 year fixed rate           2.75%

5/1 ARM                        2.375%

7/1 ARM                        2.75%