Mortgage rates have been on an upward trend over the past couple of weeks and according to Freddie Mac’s weekly mortgage rate survey. The 30 year fixed rate hit its 2015 high last week at 3.76%, up from the previous week’s 3.69%.
The 15 year fixed rate mortgage topped 3.05%, up from 2.99%. The 15 year note had been below 3.00% since the first of the year.
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The FOMC meeting minutes – the official written account of the meeting – were released last week. The minutes indicated that no Fed board member voted to increase rates – a good sign for rates.
However, two other Fed members hinted at a rate increase sometime this summer, possibly by June.
Mortgage bond holders are anticipating that event and are prone to act well before the Fed makes any move to raise rates. That could explain some of the selloff last week, pushing rates up to their current levels.
The Dow hit a record high at 18140 after Greece and the European Union came to an agreement to extend the bailout by another four months.
Upcoming Reports that could Affect Rates
There will be several economic reports released this final week of February. The Fed will get a handle on consumer inflation as the CPI number is released on Thursday. Retail inflation is expected to fall, with some economists anticipating -0.7% drop in retail prices, mainly attributed to the price of oil.
Excluding food and energy, the inflation number is expected to be something closer to par.
Inflation is bad for rates. Investors seek higher return securities in a high-inflation environment. If a mortgage-backed security is bringing in 3.5% per year and inflation is at 4%, well, you do the math.
But with inflation near zero, a safe 3.5% return doesn’t sound all that bad.
Be watching for the next major economic report on March 6th. Unemployment and payroll numbers will be announced. As usual, better-than-expected economic news could signal more rising rates.