Mortgage rates inched up last week following international reaction to the announcement of a second round of bond purchases by the US government during the holiday-shortened week. Almost two weeks ago, The Federal Reserve Bank of New York announced they would buy $600 billion of government debt by next summer, a chunk of which will come from the expected $250-300 billion of income/early pay-offs from the $1.2 trillion of mortgages it purchased earlier this year. Most of those government securities will be in the two- to 10-year range, which will have the greatest effect on mortgage rates and corporate debt. On Wednesday, in an apparent response to the Fed’s bond purchase program known as Quantitative Easing II (QE2), our debt was downgraded by China, the single largest owner of US Treasury debt. Not to be deterred, the Fed then said it would begin QE2 purchases immediately, beginning with $105 billion Treasury securities through early December, the first round of purchases aimed at pushing down long-term borrowing costs for consumers and businesses to jump-start the economy. But, is QE2 going to make that much of a difference? Are there a significant number of consumers waiting for mortgage rates to drop to 3.500% before they refinance? Today, mortgage rates jumped up amid increased international criticism of the Fed’s bond purchase plan to stimulate growth and concern that a swelling US deficit will lead to higher borrowing costs and higher inflation. Currently, the 30-Year Fixed is at 4.125% (4.267% APR) and the 15 Year Fixed is at 3.500% (3.694% APR). This week will be busy with economic data including Producer Price Index and Consumer Price Index – and everyone seems to be hoping for some inflation now. We will also have Retail Sales, Housing Starts and Jobless Claims.