WeeklyBasis 06/20/05: Possible Rate Hike Next Week

Rates/Commentary, for the week of June 20, 2005. Since I didn’t do a report last week, I’ll just cover both weeks so you’ve got what you need to keep your clients informed. 30-yr and ARM rates are up .125% in the past 10 trading days. Rates were actually up about .25% last week, but the inflation data released (Consumer and Producer Price Indices) showed no increase so rates came back down a bit. Nevertheless, the Fed’s job is to raise their benchmark Fed Funds rate to preemptively quell inflation before it starts. So even with no data showing inflation, next Thursday June 30 should still bring another .25% increase to come out of the Federal Open Market Committee meeting. This will result in a .25% increase in Home Equity Line of Credit rates. It also may affect bond trading this week, which rates for first mortgages are tied to as bond markets ‘price in’ the expected increase. But the real movement in bonds this week will come from Friday’s Durable Goods data, which measures economic strength at the manufacturing level, and also with Existing and New Home Sales data due Thursday and Friday respectively. Home sales usually don’t move bond markets much, but with all the ‘global housing bubble’ press headlines, we may see upward rate pressure if U.S. home sales come up short.

Conforming ($200,000 – $359,650) – NO POINTS
30 Year – 5.5%
15 Year – 5.25%
5/1 ARM – 5.375%

Jumbo ($359,651 – $650,000) – NO POINTS
30 Year – 5.875%
15 Year – 5.375%
5/1 ARM – 5.25%