Commentary:Mortgage investors continue to deal with headlines from Greece and today those headlines are shaded towards the possibility that the long awaited financial rescue agreement will be in place before the end of the day on Monday. Investors will likely be hesitant to move mortgage interest rates lower as the long weekend approaches and negotiations over Greece’s debt restructuring are still unresolved. The risk of a Greek sovereign debt default is not yet off of the table.
Here at home the Labor Department reported a 0.9% spike in gasoline prices in January pushed the overall consumer price index up to its fastest clip in four months. The 0.2% increase in the headline Consumer Price Index was just below most economists’ projections calling for a 0.3% surge in the pace of inflation at the consumer level. The so called “core rate”, a value that strips out the more volatile food and energy components, rose 0.2% — generally in-line with expectations. Most mortgage investors were quick to note the rate of core price increases over the 12-month period ending in January unexpectedly climb to 2.3%.
Here’s the “so what” factor buried within this pile of statistical mumbo-jumbo – the increase in the 12-month core reading, which is viewed by most investors as a barometer of inflation trends, is starting to suggest the underlying pace of inflation pressure may not be as benign as previously thought – a condition that is almost certain to make investors think twice before considering a move to nudge mortgage interest rates noticeably lower from current levels.
Looking ahead to the coming holiday shortened trading week Uncle Sam will be in the credit markets from Tuesday through Thursday conducting auctions to sell a total of $99 billion worth of debt in the form of 2-, 5- and 7-year notes. This week’s sell-off in the Treasury market has probably pushed the price of these three securities down to levels that will likely prove attractive to the global investment community. If so, well bid auctions will tend to be supportive of steady mortgage interest rates.
In terms of macro-economic data — mortgage investors will get a look at the condition of the single-family housing sector when the National Association of Realtors releases their January Existing Home Sales figures on Wednesday. On Friday the government will release last month’s New Home Sales figures. Both reports are expected to show demand in the housing sector remains soft – a condition that will not likely influence the trend trajectory of mortgage interest rates one way or the other.
Mortgage Rates as of Friday February 17, 2012 ( purchase transactions )
30 day rate locks, subject to credit score and loan to value edits
30 year fixed 3.75% 0% origination fee or 3.5% with 1.0% origination fee
30 year fixed rate 3.875%
15 year fixed rate 3.25%
5/1 ARM 2.875%
7/1 ARM 3.125%