April Inflation Numbers Good for Mortgage Rates
Inflation pressures eased a bit in April despite the biggest jump in food prices in 18 years. The Labor Department reported today that consumer prices edged up 0.2 percent last month, compared to a 0.3 percent rise in March. The lower inflation reflected a flat reading for energy, which helped offset a 0.9 percent jump in food costs as prices climbed for many basic items, from bread and milk to coffee and fresh fruits.
Mortgage rates respond positively to good inflation numbers. Simply put, banks and investors need to make a larger return on their money if inflation goes up.
Looking at the bigger picture, it also leaves room for the Fed to drop rates again in the future. Inflation is a huge part of the current mortgage rate picture and economy as a whole, in addtion to the current housing market, investment and bond insurer credit and liquidity strength, retail sales, and employment numbers.
At this point, we'll take what we can get. We have yet to feel the effect of the tax rebate economic stimulis program, which could pump up the retail sales. The US dollar has been gaining strength as of late, which could also help the economy through this slump.
You might ask what the heck all this economy stuff has to do with mortgage rates, but it is all related. Especially in the current market. Mortgage rates are offered at the 10 Year Treasury Yield price plus a mortgage spread premium. This spread premium has risen significantly as a result of the subprime mortgage crisis due to the perceived Risk for the mortgage investor. When the economy is strong, inflation is stable, and homes appreciate in value, the mortgage spread premium decreases as risk goes down. This has a direct and significant effect on lower mortgage rates.
Foreclosure rates continue a dramatic rise in year over year numbers and we need to experience a moderation in this area to start the real economic recovery in my opinion. There are many predictions as to when high foreclosure rates will diminish, but a clear picture has yet to be determined. A closer look at foreclosure rates shows us that the biggest percentage of foreclosures are coming from a relatively isolated few housing markets in California, Las Vegas, Florida, along with a few other metropolitan areas. This could actually be good news on the whole, as we may experience a quicker than expected housing recovery in many large regional areas that experienced moderate home appreciation during the mortgage boom years. Once the ball starts rolling, lenders will jump in, home loans and refinance mortgages will become more attainable, and things will begin to look rosy again.
We are still at great mortgage rates now. I will be curious to see where we end up after the economic recovery hits it's stride.
May the Mortgage Rates be With You!
Refinance Tool Box
Mortgage rates respond positively to good inflation numbers. Simply put, banks and investors need to make a larger return on their money if inflation goes up.
Looking at the bigger picture, it also leaves room for the Fed to drop rates again in the future. Inflation is a huge part of the current mortgage rate picture and economy as a whole, in addtion to the current housing market, investment and bond insurer credit and liquidity strength, retail sales, and employment numbers.
At this point, we'll take what we can get. We have yet to feel the effect of the tax rebate economic stimulis program, which could pump up the retail sales. The US dollar has been gaining strength as of late, which could also help the economy through this slump.
You might ask what the heck all this economy stuff has to do with mortgage rates, but it is all related. Especially in the current market. Mortgage rates are offered at the 10 Year Treasury Yield price plus a mortgage spread premium. This spread premium has risen significantly as a result of the subprime mortgage crisis due to the perceived Risk for the mortgage investor. When the economy is strong, inflation is stable, and homes appreciate in value, the mortgage spread premium decreases as risk goes down. This has a direct and significant effect on lower mortgage rates.
Foreclosure rates continue a dramatic rise in year over year numbers and we need to experience a moderation in this area to start the real economic recovery in my opinion. There are many predictions as to when high foreclosure rates will diminish, but a clear picture has yet to be determined. A closer look at foreclosure rates shows us that the biggest percentage of foreclosures are coming from a relatively isolated few housing markets in California, Las Vegas, Florida, along with a few other metropolitan areas. This could actually be good news on the whole, as we may experience a quicker than expected housing recovery in many large regional areas that experienced moderate home appreciation during the mortgage boom years. Once the ball starts rolling, lenders will jump in, home loans and refinance mortgages will become more attainable, and things will begin to look rosy again.
We are still at great mortgage rates now. I will be curious to see where we end up after the economic recovery hits it's stride.
May the Mortgage Rates be With You!
Refinance Tool Box
posted by Jim Bisnett at
1:11 PM
0 Comments:
Post a Comment
<< Home