The Commerce Department reported consumer spending rose in August by the most in six months. The increase in spending was largely driven by higher gasoline prices, which rose 28.2 cents per gallon last month. Personal incomes edged up 0.1% but the gain was eroded by a matching 0.1% rise in core inflation. This data strongly hints economic growth in the third-quarter of 2012 will be slow – a condition almost certain to prove supportive of the prospects for steady to perhaps fractionally lower mortgage interest rates. The likelihood the economy will accelerate in any meaningful way prior to end of the year is very low.

Looking ahead to the coming week — mortgage investors will be keenly attuned to Monday’s Institute of Supply Management’s report on manufacturing activity in September and to the companion service sector report on Wednesday. As usual Thursday morning’s weekly initial jobless claims report will draw attention as will the minutes from the Fed’s September 12th and 13th meeting released later that same afternoon. All of these prior reports will be relegated to little more than background noise when the Labor Department releases its’ September nonfarm payroll figures( expected to be 120k new non-farm payrolls ) early Friday morning. The entire battery of upcoming economic news is currently expected to be — at worst, mortgage interest neutral — and at best, slightly mortgage interest rate friendly.

Mortgage Rates as of September 28, 2012 ( purchase transactions )

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

FHA

30 year fixed 3.00% 0% origination fee 2.875% with 1.0% origination fee

Conventional

30 year fixed rate 3.25% (*LTV and credit score could impact this quote)

15 year fixed rate 2.75%

5/1 ARM 2.375%

7/1 ARM 2.75%