Since enjoying all-time lows over the past few months, average mortgage rates have steadily risen, coming up by an average of .30 percent since the lowest point in January. Regardless, home purchase activity remains brisk and we continue to expect a hot spring sales season for home buyers and sellers. We anticipate the trend for rates moving steadily higher, although we could see short-term improvements here and there.
Why the rise in rates? It’s mainly due to increasing economic optimism, additional government stimulus and rising inflation rates. Climbing inflation leads to rising rates and this week we’ve got two important inflation reports due out. Markets will be watching them closely out ahead of next week’s important Fed Meeting.
What I’m watching this week…
This week markets will be keeping an eye on the passage of the latest round of Covid stimulus. The Senate passed the bill and it now heads back to the House for final approval before making its way to the President’s desk for final signature.
On Wednesday, we get our first look at the important inflation data coming out this week. The consensus for the monthly CPI (Consumer Price Index) in February is a 0.4 percent increase versus January’s 0.3 percent rise with the core seen at plus 0.2 percent versus no change in January. Annual rates are expected at 1.7 percent overall and 1.4 percent for the core which would compare with 1.4 percent for both in January. We’re closely monitoring the annual core rates, which markets will likely react badly to if an unexpected rise shows up.
Traders will also be closely watching the midweek auction of the 10-Yr Treasury note. Demand has been rather disappointing even as the yield percentages keep rising in an effort to entice buyers. As we know, mortgage rates often follow the trend line of the 10-yr, so if this week’s auction causes yields to rise, we could see rates rise in concert.
Friday brings the second look at inflation this week with the PPI (Producer Price Index). This time it’s wholesale prices we’re looking at and after January’s unexpected 1.3 percent monthly jump in producer prices, a monthly increase of 0.4 percent for yearly growth of 2.6 percent are the headline consensus forecasts for February. The latter would be up a sharp 9 tenths from January. The bond market is likely to react negatively to these rising inflation levels.
I’ll be keeping an eye on all of it for you! If you are considering a home purchase or have not yet refinanced in the last year, reach out by replying to this email or calling me directly and let’s explore your specific situation.