30 year mortgages swung higher by roughly .25% in rate last week with most lenders – the increase was caused primarily by a fresh round of “my god inflation is going to destroy us all” worries sparked by some tough talk from the Fed (via the minutes rom last FOMC conclave) and one-off speeches by Fed honchos Plosser (Philly) and Hoenig (KC).
Much was made of a surprise (though irrelevant to mortgage rates) hike in the discount rate, and a warmer than expected reading on producer prices.
Mix the ingredients above with a stock market trying to front-run an economic recovery that may or may not soon materialize, and you get a spike in rates. Only time will tell whether this is a head fake, or the beginning of the end of an ultra-low rate mortgage market putting rates on an upward slope for good.
We are getting wide angle view of the economy this week with scheduled reports on several key sectors. While you review the week, recall standing order number 1: Good economic news tends to hurt mortgage rates, while poor economic news helps, and inflation is always a bad thing in mortgage land.
From the calendar:
Housing Market: Fresh snaphsots of the housing market will be delivered on Wednesday the 24th and Friday the 26th this week as new home sales and existing home sales for January report – if either of these reports spark a stock rally, look for rates to be hurt.
Economy: [Gross Domestic Product, 4th Quarter] Friday, Feb 26th 8.30AM It is expected that the economy grew at a 5.3% clip in the fourth quarter – a significant surprise in either direction could move mortgage rates. Within this report, a critter called the GDP deflator lives – it is a key measure of inflation, and with markets in a hyper-aware state over inflation, information beyond the headline on the GDP report may well have a big impact on rates.
Consumer: Confidence reports on Tuesday Feb 23rd, Consumer Sentiment, Friday Feb 26th. Both of these numbers are correlate well with consumer spending, so are seen as leading indicators for increased spending/consumption. This is another good for the economy but bad for mortgage rates report if it shows the consumer sector is heating up.