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Rate Update

Following consecutive weekly drops since the middle of June, mortgage rates rose for the second straight week. Economic data was mixed during the holiday-shortened week. Jobless Claims fell to their lowest level since mid-July and the Fed Beige Book report showed that the economy is still growing, but with “widespread signs of deceleration”. Mortgage rates have fallen substantially over the summer as weak economic data and the debt crisis in European countries led investors to reduce economic growth forecasts and invest in the safest assets, including US Treasuries and mortgage-backed securities (MBS). The current environment is still generally supportive of low mortgage rates, but some investors believe the worst-case scenario is already “priced in” to the markets. Another factor in the historic rate decline this summer was the possibility the government would provide additional stimulus to support the housing and interest rate markets, however, the political climate seems to be shifting away from additional government support. Currently, the 30-Year Fixed is at 4.000% (4.141% APR) and the 15-Year Fixed is at 3.625% (3.874% APR). This week will feature the monthly inflation reports. The Producer Price Index (PPI) focuses on the prices of intermediate goods used by companies to produce finished products. The Consumer Price Index (CPI), the most closely watched inflation report, looks at the price of finished goods. We will also see Retail Sales figures on Tuesday. Retail sales is a leading indicator and accounts for 70% of economic activity.

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