Rate Lock Advisory

Sunday, July 12th

This week has plenty scheduled that has the potential to affect mortgage rates. There are six monthly economic reports set to be posted, three of which are considered to be highly important to the bond market and mortgage pricing, in addition to a periodic Fed report and two days of congressional testimony by the new Fed Chairman. Tomorrow is the only day of the week without any data scheduled, but this weekend's news that Iran and the U.S. are actively exchanging military action should influence trading negatively tomorrow morning. We will also be watching a handful of Fed member speeches and some earnings reports this week to possibly affect bond trading.

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Bonds

Market Closed

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Dow

Market Closed

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NASDAQ

Market Closed

Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock

High

Unknown

Consumer Price Index (CPI)

The first scheduled event of the week will be the release of June's Consumer Price Index (CPI) at 8:30 AM ET Tuesday. This very important data measures inflationary pressures at the consumer level of the economy. Bonds are extremely sensitive to inflation data because it affects the value of their future fixed interest payments and is a contributing factor in what the Fed decides to do with short-term rates. Analysts are expecting to see a 0.1% decline in the overall reading and a 0.2% increase in the core data that excludes volatile food and energy costs. They are both predicted to move a little lower on an annual basis. If we see weaker than predicted results, the bond market should react favorably and mortgage rates will likely move lower. However, stronger than expected inflation readings could send mortgage rates noticeably higher Tuesday.

Medium

Unknown

Fed Talk

Also Tuesday morning is day one of Fed Chairman Warsh's two-day semi-annual testimony before Congress. He will be updating the House Financial Services Committee Tuesday morning on the status of the economy and monetary policy, then will do so to the Senate Banking Committee Wednesday morning. There is a good possibility of seeing the markets react to his words, possibly leading to a change in mortgage rates Tuesday. He will be speaking at 10:00 AM both days, followed by Q&A from the committee members. We usually see a much stronger reaction to something said during the first day of the proceedings because his prepared statement on day two often is the same as the first day.

High

Unknown

Producer Price Index (PPI)

June's Producer Price Index (PPI) at 8:30 AM ET Wednesday is the week's second highly important inflation index. The PPI measures inflationary pressures at the wholesale level of the economy, compared to the CPI’s consumer level. As with Tuesday’s version, there are also two readings that we will be watching. A large increase would fuel concerns about rising wholesale inflation, which would likely be passed on to consumers in the immediate future. Analysts are expecting to see a 0.2% rise in the overall reading and a 0.4% increase in the core data. Good news for mortgage shoppers would be weaker readings.

Medium

Unknown

Fed Beige Book

The Federal Reserve's Beige Book report is set to be released at 2:00 PM ET Wednesday afternoon. This report is named simply after the color of its cover but is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by Fed region throughout the U.S. via the eyes of their business contacts. If there are any significant changes in conditions since the last update, we could see an afternoon move in the markets and mortgage rates Wednesday. Signs of slowing economic growth and/or softer inflation would be favorable news for rates.

High

Unknown

Retail Sales

Thursday's sole monthly economic report will be the third highly influential report of the week. June's Retail Sales report will be posted at 8:30 AM ET. It is expected to show that retail-level sales rose 0.2% last month. Because consumer spending makes up over two-thirds of the U.S. economy and bonds are more attractive to investors during weaker economic conditions, this data is watched very closely. The smaller the increase in sales, the better the news it is for mortgage rates.

Low

Unknown

Housing Starts (New Home Construction)

Friday brings us the remaining three economic releases, beginning with June's Housing Starts report at 8:30 AM ET that will give us an indication of housing sector strength and future mortgage credit demand. However, it doesn't cause much movement in mortgage rates unless it varies greatly from forecasts. This month's release is expected to show an increase in new home groundbreakings. The lower the number of starts, the better the news for the bond market even though the data will probably have little impact on mortgage pricing.

Medium

Unknown

Industrial Production

Also set for release Friday morning is June's Industrial Production data at 9:15 AM ET. It measures output at U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength. Forecasts show an increase of 0.2% from May's production, signaling the manufacturing sector was modestly stronger last month. This report is far from the most important manufacturing report we get each month, especially when the week has other events scheduled. Good news for rates would be a decline.

Medium

Unknown

Univ of Mich Consumer Sentiment (Prelim)

The final economic report of the week will be the University of Michigan's Index of Consumer Sentiment at 10:00 AM ET Friday. This index is released in a preliminary form each month and then followed up two weeks later with a final reading. The preliminary reading for July will be posted Friday morning and is expected to show an increase from June's final reading of 49.5. This would mean surveyed consumers are more optimistic about their own financial and employment situations this month than they were last month. It is believed that if consumer confidence in their own finances is rising, they are more apt to make a large purchase in the near future. And with consumer spending making up such a large part of our economy, investors pay close attention to reports such as these. Accordingly, a decline in confidence would be good news for mortgage rates because it means many consumers are likely to delay making large purchases, limiting economic growth.

Low

Unknown

Corporate Earnings

One final note about the week is that corporate earnings season starts this week. These announcements don't directly impact mortgage rates, but they do heavily influence stocks, which can have an indirect impact on bond trading and mortgage pricing. Generally speaking, bad news for stocks is good news for bonds and rates. If some of the major companies reporting this week announce weaker than expected earnings and/or future earnings projections, stocks should move lower, bringing funds into bonds.

Overall, Tuesday is the most important day for rates due to the influence consumer inflation data carries in the markets and Fed Chairman Warsh’s congressional testimony. Wednesday and Thursday also have reports scheduled that will draw plenty of attention, meaning large changes in rates are possible those days also. No day is a clear choice for calmest despite a light calendar tomorrow, partly because the markets will likely be reacting to this weekend's Iran War headlines. We should see an active week for rates, so it would be prudent to keep an eye on the markets if still floating an interest rate and closing in the near future.

Float / Lock Recommendation

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.