THE BASIS POINT

WeeklyBasis 12/15/03: Low Inflation, Low Utilization Fueling Low Rates

Rates/commentary for the week of December 15, 2003. Rates are lower by about .125 to start this week. On news of Hussein’s capture, investors bought equities and sold bonds, but this rate-unfriendly trading activity was more muted than expected because everyone is waiting for Tuesday’s economic data. Consumer Price Index (which measures inflation) and Capacity Utilization (which measures if companies are running full steam) will be closely watched for abnormal increases. For a couple years now, low inflation and low utilization have been working together to keep the Fed firm on low rates. When companies aren’t running even close to full production capacity (which is the case), they have a hard time raising prices. This containment of inflation preserves a low-rate environment. Rates are definitely still working in all our favor.You can now do East and North Bay MLS searches from my website (at www.rpm-mortgage.com/julian , click on “Find a Home”). San Fran coming soon. I will be out of town next week, so call me on my cell (415-250-1050) if you need anything.

Conforming ($50K – $333,700K) – NO POINTS
30 Year: 5.75% (5.89% APR)
15 Year: 5.0% (5.14% APR)
5/1 ARM: 4.75% (4.90% APR)

Jumbo ($333,701 – $650,000) – NO POINTS
30 Year: 6.0% (6.14% APR)
15 Year: 5.375% (5.515% APR)
5/1 ARM: 4.875% (5.025% APR)