Mortgage Rates Drop Amid Inflation, Oil Volatility

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Mike J. Gold
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RE/MAX Horizons Group
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Mortgage interest rates were pushed down slightly this week due to rising bond prices.  Solid performance in the core producer price index helped to allay  fear of inflation early in the week.  The dip in the Dow Jones industrial Average combined with volatility in the oil market resulted in significant gains for the bonds market.

Interest rates on government and conventional loans dropped by 3/8 of a discount point this week.  Oil prices and inflation fears will continue to be factors in trading. 

The Fed meets Tuesday and Wednesday this week to determine further action.

Date and Time
Consumer Confidence Tuesday,
June 24,
10:00 am, et
57.0 Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.
Durable Goods Orders Wednesday,
June 25,
8:30 am, et
Unchanged Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
New Home Sales Wednesday,
June 25,
10:00 am, et
Down 3.0% Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
Fed Meeting Adjourns Wednesday,
June 25,
2:15 pm, et
No change Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting.
Q1 GDP final revision Thursday,
June 26,
8:30 am, et
Up 1.0% Moderately important. The aggregate measure of US economic production. A decrease may lead to lower rates.
Existing Home Sales Thursday,
June 26,
10:00 am, et
Up 1.4% Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
5-year Treasury Note Auction Thursday,
June 26,
1:30 pm, et
None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Personal Income and Outlays Friday,
June 27,
8:30 am, et
Income up 0.4%,
Outlays up 0.7%
Important. A measure of consumers' ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation Friday,
June 27,
8:30 am, et
Up 0.2% Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.

Investors should anticipate some volatility in mortgage bonds prior to the Fed's adjournment Wednesday.  Should the Federal Reserve determine that inflation fears are higher than previously thought, more bond market volatility could result.  Investors are optimistically cautious and watching the Fed's actions carefully.

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