Mortgage Rates Set to Rise

Consumer spending continues to rise nationwide, fueled by jobs growth and a rosier outlook for the U.S. economy. Unfortunately for mortgage rate shoppers NH & MA, it may also lead to higher mortgage rates later this week.

Thursday morning (1/12/12), the Census Bureau will release its U.S. Retail Sales data for December. The report is expected to show an 18th consecutive monthly increase, with analysts projecting sales volume higher by 0.4 percent from November.

This would be double the increase from last month, which saw a 0.2 percent increase in Retail Sales.

The Retail Sales report tallies receipts collected by retail and food-service stores nationwide. When the sum of these receipts rise, it puts pressure on mortgage rates to do the same. The connection is straight-forward.

Retail Sales are the largest part of “consumer spending” and consumer spending accounts for the majority of the U.S. economy — up to 70 percent, by some estimates.

As the economy goes up, so go mortgage rates.

Remember: today’s ultra-low mortgage rates have been partially fueled by weak economies — both domestic and abroad — going back 4 years. Stock markets have sold off as economies have faltered worldwide, leading investors to seek refuge in the relative safety of U.S.-backed mortgage bond market. The new-found demand for mortgage-backed bonds has helped drop mortgage rates to levels never seen in history.

When economic recovery is apparent, therefore, we should expect a mortgage rate reversal, and should expect for it to happen quickly. Stock markets should rise; bond markets should fall. Mortgage rates will climb. Rate shoppers will lose.

Last week’s strong jobs report sparked hope for the U.S. economy. If Thursday Retail Sales data reveals similar strength, the risk in “floating” your mortgage rate may be too great. The safer play is to lock your rate today.

The Retail Sales report will be released at 8:30 AM ET.

I’d love to help you with your home financing. Please call me today!

Tammy Verani
Senior Loan Consultant
(603) 232-9617 Direct
tverani@rmsmortgage.com
www.LoansByTammy.com
Residential Mortgage Services, Inc

For information purposes only and is not a commitment to lend as defined by Regulation Z, Section 226.2. Programs, rates, terms and conditions are subject to change at any time. Availability dependent upon approved credit and documentation level, acceptable appraisal, and market conditions. Residential Mortgage Services, Inc. is a Maine Corporation headquartered at 24 Christopher Toppi Drive, South Portland, ME 04106. NMLS ID# 1760; ME License No. SLM2537; Licensed by the New Hampshire Banking Department, NH License No. 8816-MB; MA Lending License No. MC1760; MA Broker License No. MC1760; CT License No. 14352; RI License No. 20092626LL; NY Mortgage Banker License No. B500942; FL License No. MLD232