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Week of June 12, 2011 Mortgage Market Commentary

The US economy continues to grow. While that statement is true, the rate of growth continues to slow, and we seem to be hitting an even slower patch. While the economy has been very dependant on manufacturing to drive this recovery, we are seeing some slowing in that segment. In previous recoveries, consumers would generally be returning to spending, and driving more of the recovery effort. However, with the economy slow to add jobs, consumers are still holding back. This week is jam-packed with economic data for markets to digest, including Retail Sales, Industrial Production, and both the Producer and Consumer Price Indices. With so many signs that consumers are not engaging and manufacturing is slowing, a positive Retail Sales report or surprise increase in IP would probably jolt the market, and rates might move upward. We’ve had some concerns with inflation accelerating when economic growth is slowing, but as long as the PPI and CPI remain near or below expectations, then they may not provide much upward pressure on mortgage rates. Mortgage Rates
30Yr 4.75% 4.25% 3.75% 3.25% 2.75%
3/17
13,000.00

This Week’s Top Economic Reports and Events
Report/Event Date Prior Est. Impact 6/14 0.5% -0.7% Significant Retail Sales The week could start with mortgage rates trending downward, especially if Retail Sales comes in much lower than expected. 6/14 0.3% 0.2% Producer Price Index (core) Moderate Prices at the wholesale level of the economy have risen significantly, but not all that pressure has been passed through during this recovery. 6/15 0.2% 0.1% Consumer Price Index (core) Significant If consumer prices continue to stay at, or near expectations, then we should not see too much upward pressure on mortgage rates. 6/15 0.0% 0.2% Industrial Production Significant With the economy stumbling a bit, an unexpectedly big increase in IP would be welcome, but it might push mortgage rates upward. 6/17 -0.3% 0.4% Leading Economic Indicators Moderate After dropping last month, a pop back up 0.3% or more would likely generate some moderate upward pressure on mortgage rates.

15Yr

1Yr ARM

3/31

4/14

4/28

5/12

5/26

6/9

Dow Jones

12,750.00 12,500.00 12,250.00 12,000.00 11,750.00 11,500.00 17-Mar 31-Mar 14-Apr 28-Apr 12-May 26-May 9-Jun

9.00

Historical Rates

6.00 3.00 0.00
Jun-06 Jun-07 Jun-08 Jun-09 Jun-10

Mortgage Rate Trends
Short-Term Long-Term Volatility High

Interest Rates and Indexes
1 Yr T-Bill 10 Yr T-Note 6 Month Libor Prime Rate 0.180% 11th D. COFI 1.359% 3.010% COSI 2.230% 0.397% CODI 3.250% MTA 0.305% 0.263%

1 Yr CMT CODI

MTA Prime

COFI

10 Year Treasury Note Trend
3.75 3.50 3.25 3.00 2.75
17-Mar 31-Mar 14-Apr 28-Apr 12-May 26-May 9-Jun

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