THE BASIS POINT

WeeklyBasis 07/16/07: Inflation Concerns Trump Housing Market

Fixed and ARM rates open this week down about .125% this week, but the rest of the week isn’t likely to trend downward. Fed Chairman Ben Bernanke gives his semiannual testimony on the economy before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday – and he’ll have fresh inflation data to work with from Tuesday’s manufacturing inflation report and Wednesday’s consumer inflation report. Even if inflation numbers are weaker than expected, Bernanke will most likely tell Congress that the Fed is more worried about inflation than it is about the housing market hurting the economy. Inflation is a harder monetary problem to solve than recession, so as stock markets continue to hit new highs, the Fed is going to err on the side of inflation buster. This means rates should remain in their existing range.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.75% (6.89% APR)
10/1 ARM: 6.875% (7.015% APR)
5/1 ARM: 6.625% (6.775% APR)

Jumbo ($417,001 – $650,000) – NO POINTS
30 Year: 6.875% (7.015% APR)
10/1 ARM: 6.875% (7.015% APR)
5/1 ARM: 6.625% (6.775% APR)