Rates

February 21, 2012 - Interest Rate Update

Current Mortgage Rate Trend Direction: Mortgage Rates Continue Sideways

Mortgage Rates start slightly higher this week as increased optimism that a Greek bailout package will be approved on Monday caused investors to shift to riskier assets, which was negative for mortgage rates. Mixed US growth and inflation data had little net impact.

The inflation data released last week showed that core inflation rates have continued to rise. Core CPI was 2.3% higher than one year ago, which was the highest annual rate since September 2008. Fed officials forecast that core inflation levels will moderate later in the year. If it unexpectedly continues to move higher, however, the impact could be large. Higher inflation is negative for mortgage rates. In addition, it would be more difficult for the Fed to maintain its current loose monetary policy. Investors will closely watch core inflation levels in coming months to see if the Fed's forecast proves correct.

One thing to take note of - to a very fragile housing market, an uptick in home loan rates would be a big concern. Since the Fed has touted a QE3 as a directive to help the housing market - if rates do start ticking higher - we would not be surprised to see the Fed do more to help housing.

Jeff Seabold, CEO

jseabold@csfinancial.com