Today reports out of China and Britain show that inflation abroad is a real concern. China has had to make several rate hikes within their banking system to keep inflation from getting away on them. Though inflation here in the US is still low its a global market for investors and if they are able to get a higher yield on investments in China (due to their higher rates) our bonds look less attractive and our rates will have to rise to attract investors.
That being said we have both the Producers Price Index (PPI) and the Consumers Price Index (CPI) figures coming out tomorrow and Thursday. If these numbers show inflation is creeping up here in the US we could very easily see mortgage rates move higher in a hurry. Rates have made a big move higher in recent weeks, but the past few days rates have found a level of support and stabilized. IF these reports are not big surprises we could see rates improve in the short-term, but the long-term outlook is still indicating that rates will be moving higher in 2011.
My next post will address some of the changes coming with Fannie Mae and Freddie Mac along with the new Fed rules coming out in April that relate to the Dodd-Frank bill. All these changes are part of the governments effort to avoid another big disaster in the housing market. The effect they will certainly have is higher rates and costs to the consumer and potentially limiting competition in the mortgage lending industry. Stay tuned.
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