Mortgage Interest Rates Increase This Week.

Mortgage bond prices fell pushing mortgage interest rates higher.  Inflation fears were fanned once again by Fed Chairman Bernanke with warnings that the Fed may have to begin raising rates sooner than most analysts expected.  Stronger than expected retail sales figures piled on an already battered mortgage bond market pushing bond prices lower and rates higher.  Oil prices remained volatile, which continued to fan inflation fears.  For the week, interest rates on government and conventional loans rose over a full discount point.

The producer price index Tuesday will be the most important event this week.  Housing starts, industrial production, capacity use, and leading economic indicators data may also move the market.  Expect oil and stocks to continue to factor into trading, as inflation fears remain.

Weather

The mortgage interest rate markets are subject to an enormous number of factors.  Most analysts agree that weather can have an effect on market activity.  Although the effects are seldom long lasting, they can be quite significant.

The United States is the world’s largest exporter of corn.  Relatively rainy weather recently across the Midwest portions of the United States has delayed planting of corn.  This caused corn prices to escalate.  Wheat and other staples are also in high demand amid reduced supply, causing prices to rise.  Couple these factors with rising energy costs and the picture does not look pretty.  Higher commodity prices result in heightened inflationary fears.  Many analysts predict the food price increases already seen most everywhere will continue.

The weather also has the potential to directly alter fuel prices.  As we enter the hurricane season, many oil and gas fields in the Gulf along with refineries along coasts are susceptible to damage.  If this were to occur, oil prices would almost surely rise sharply.  Rising oil prices would do little to help mortgage bond prices already pressured by inflationary fears.  The result would most likely be higher rates.

The economic effects of various weather occurrences may cause only temporary changes in economic activity.  However, those times of change can have a lasting impact on people obtaining mortgages.  Despite the rate increases seen recently, mortgage interest rates remain historically favorable for borrowers.  Now is a great time to take advantage of rates at these levels.