Will Mortgage Rates Continue to Rise in the Week Ahead

Last week was a sour week for mortgage rates. The economic data was fairly light but the releases we received were better than expected resulting in money flowing out of bonds and into an oversold stock market. At the beginning of last week, many lenders were offering 4.125% as par but by the end of the week, par had risen to 4.375%.

We have no scheduled releases for today but the data picks up tomorrow and continues the rest of the week with some high impacting releases. Tomorrow we get a read on the strength of the American consumer with Retail Sales. Economists are expecting to see a month over month increase of 0.3%. Mortgage rates should benefit with a lower than expected reading. Wednesday’s highest impacting report will be Industrial Production which measures the strength of the national manufacturing sector. Economists are expecting a 0.2% month over month increase. Thursday we get a read on inflation at the producer level with the release of the Producer Price Index followed by weekly Jobless Claims. The data continues Friday when we get a read on inflation at the much more important consumer level with the Consumer Price Index followed by Consumer Sentiment.

Reports from fellow mortgage professionals indicate lender rate sheets to be improved over Friday’s. The par 30 year conventional rate mortgage remains in the 4.375% to 4.625% range for well qualified consumers. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all the closing costs including an estimated one point loan origination/discount/broker fee. For consumers with higher loan to values or lower FICO scores, you should consider a FHA loan which offers similar rates but with higher closing costs due to an upfront fee that FHA charges.

Mortgage rates lost a lot of ground last week, much more than the economic data should have caused. Nothing wrong with locking at today’s rates, especially if closing in the near term. If closing in longer than 2 weeks, I feel floating might be worthwhile as a correction might occur. Keep in mind, tomorrow we get Retail Sales. If this report is better than expected, rates could continue to rise. If you plan to float, make sure you stay in close contact with your mortgage professional as the ride could be bumpy this week.