THE BASIS POINT

WeeklyBasis 10/03/05: Wage Growth May Increase Rates

Rates are up another .125% this week (the third week in a row) on inflation fears that are coming from higher fuel prices and higher costs reported by manufacturers this morning. The Fed’s job is to slow the money supply (with higher rates) before inflation becomes an issue. So when markets see signs if inflation, they trade on the assumption that the Fed will continue hiking rates. This is how markets kicked off the week, and the data to come includes factory orders Tuesday, non-manufacturing sector growth data Wednesday, and most importantly, the September jobs report Friday. We can expect a huge drop in jobs growth because of Katrina, which would end 27 months of job gains. Normally rates would drop because of this, but many are saying that markets will shrug this off as a one-time event. The big focus will instead be on wage growth. If wages are increasing too fast, the Fed will keep hiking rates. In general, rates will be moving up this week, with a small possibility for some relief Friday.

Conforming ($200,000 – $359,650) – NO POINTS
30 Year: 5.875% (6.015% APR)
15 Year: 5.5% (5.64% APR)
5/1 ARM: 5.875% (6.025% APR)

Jumbo ($359,651 – $650,000) – NO POINTS
30 Year: 6.25% (6.39% APR)
15 Year: 5.75% (5.89% APR)
5/1 ARM: 5.875% (6.025% APR)