A big economic number was released this morning called the PCE (Personal Consumptions Expenditures). It basically measures how much the average consumer is spending and believe it or not, wallets and purses are coming out more than ever. The number was expected to come in at 2.0%, but it exceeded that by measuring 2.2%. Great news for stocks, but bad news for interest rates.
Why? If people are spending more, then retailers and service providers can raise their prices. Translation = inflation. Inflation is the nemesis of mortgage-backed securities as it indicates potential problems for our economy, and if we have the threat of it, money comes out of the bond market. True to form, the Fannie Mae 30-yr fixed 5.5% security is down 22 basis points (bps) this morning and rates will be higher by around .125%.
Still, with rates in the low 6%'s, and property values at an attractive level, there's no better time to buy or refi then right now. Align yourself with a mortgage professional and start 2008 off with a mission to have the best year ever.