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Weekly Mortgage Outlook: May 11

By Brian O’Connell
It’s spring, a time when economic indicators take a back seat to the calendar, and a time when mortgage rates historically rise again.

Category Product: 
Mortgages
Category Finance: 
Personal Finance
Keywords: 
Mortgages, ARMs, Weekly Mortgage Rates, Buying a Home, Owning a Home, Selling a Home
Introduction: 

By Brian O’Connell
It’s spring, a time when economic indicators take a back seat to the calendar, and a time when mortgage rates historically rise again.

So far, that’s been the case in May. sbup’s weekly mortgage rate indicator of 30-year fixed and 15-year fixed mortgages are both up this week, with the 30-year rate rising from 5.09% to 5.17%, and the 15-year rate rising from 4.80 to 4.89%.

Since 2004, mortgage rates have shown a similar pattern as winter gives way to spring. From May to September in each of those years, mortgage rates have inched up. One reason is that gas prices tend to rise in the spring and summer months (as oil companies take advantage of the increased number of consumers who travel during nice weather).

Rising oil prices could mean a lot of things, but in this peculiar economic environment, higher prices at the pump are the number one “red flag” that economists point to as an inflationary indicator. And when inflation goes up, bond prices go down, and drive mortgage rates up in the process.

It’s true that inflation isn’t on top of the U.S. economy yet, but it is hovering off in the distance. What could draw inflation closer is a rebounding economy. Reasonable economic minds differ over whether we are into a recovery yet, even a mild one. But key metrics that economists use say we finally seem to be climbing out of the financial tangle that we’ve been in since early 2008. Last Friday’s jobs number, with 539,000 Americans losing their job, was not that bad from an economic point of view. Job analysts had expected many more job losses (over 630,000) and the result is the lowest number of jobs lost per month since October 2008.

Plus, the Bureau of Labor Statistics has revised February and March’s job loss numbers downward, another sign that the pain might be easing.

So what does the jobs picture mean to mortgage rates? If more Americans are keeping their jobs, many will breathe a sigh of relief and begin spending again (we’re already seeing higher consumer confidence numbers this spring). If people start spending again in significant numbers, that should drive prices upward again and invite inflation in for a spell.

Like links in a chain, that sequence of events would make it harder for the Federal Reserve to keep mortgage rates down, and put more pressure on the bond market.

So this spring, look for a trend of higher mortgage prices and watch particularly for higher gas prices, a historical harbinger of higher mortgage rates.

As always, sbup’s mortgage rate search tool can help you find the best mortgage rates in your area.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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So far, that’s been the case in May. sbup’s weekly mortgage rate indicator of 30-year fixed and 15-year fixed mortgages are both up this week, with the 30-year rate rising from 5.09% to 5.17%, and the 15-year rate rising from 4.80 to 4.89%.

Since 2004, mortgage rates have shown a similar pattern as winter gives way to spring. From May to September in each of those years, mortgage rates have inched up. One reason is that gas prices tend to rise in the spring and summer months (as oil companies take advantage of the increased number of consumers who travel during nice weather).

Rising oil prices could mean a lot of things, but in this peculiar economic environment, higher prices at the pump are the number one “red flag” that economists point to as an inflationary indicator. And when inflation goes up, bond prices go down, and drive mortgage rates up in the process.

It’s true that inflation isn’t on top of the U.S. economy yet, but it is hovering off in the distance. What could draw inflation closer is a rebounding economy. Reasonable economic minds differ over whether we are into a recovery yet, even a mild one. But key metrics that economists use say we finally seem to be climbing out of the financial tangle that we’ve been in since early 2008. Last Friday’s jobs number, with 539,000 Americans losing their job, was not that bad from an economic point of view. Job analysts had expected many more job losses (over 630,000) and the result is the lowest number of jobs lost per month since October 2008.

Plus, the Bureau of Labor Statistics has revised February and March’s job loss numbers downward, another sign that the pain might be easing.

So what does the jobs picture mean to mortgage rates? If more Americans are keeping their jobs, many will breathe a sigh of relief and begin spending again (we’re already seeing higher consumer confidence numbers this spring). If people start spending again in significant numbers, that should drive prices upward again and invite inflation in for a spell.

Like links in a chain, that sequence of events would make it harder for the Federal Reserve to keep mortgage rates down, and put more pressure on the bond market.

So this spring, look for a trend of higher mortgage prices and watch particularly for higher gas prices, a historical harbinger of higher mortgage rates.

As always, sbup’s mortgage rate search tool can help you find the best mortgage rates in your area.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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