When people find out I work for Quicken Loans or even in the financial/mortgage industry, they begin to pepper me with questions: should they buy a house (are they ready to?), what do I think their credit score is (Duh. Quizzle knows.), and the most common: where do I think mortgage rates are headed?
Honestly, no one knows for certain. You can ask as many people as you want as many times as you want – none of us have that crystal ball.
Why don’t we know? Crap happens! Technically speaking, mortgage rates are comprised of many factors which are affected by even more factors and so on….it can all get very confusing.
Keeping all that in mind, there are some regular economic reports that have the power to move mortgage interest rates up or down. Knowing when these reports occur and what they contain can help keep you informed of the direction of mortgage rates and when to lock your rate.
In no particular order, the guilty mortgage rate tipsters are:
- Gross Domestic Product (GDP) – The grand daddy of all reports, it determines the total dollar value of everything produced by all the people and all the companies in the U.S. It provides the best view of the economy’s overall health (i.e. are we producing more or less, and is it costing us more or less?) and also determines whether the country is considered in a recession or expansion. A lower month-over-month number can cause rates to decrease.
- Retail Sales – Are consumers buying more or less “stuff”? Retail sales represents two-thirds of the GDP and is a key predictor of economic growth. A month-over-month increase can cause rates to increase.
- Employment Situation Report – Measures the percentage of the labor force that is unemployed, as well as the number of people on government or business payrolls. Month-over-month, a lower unemployment percentage paired with a higher payroll number can cause rates to increase.
- Consumer Price Index or CPI – In short, has the average price we as consumers pay for goods and services gone up or down? There is also Core CPI, which removes the cost of food and energy from the equation, since these are extremely volatile (as we have seen lately!). Along with PPI (see below), CPI is an excellent predictor of inflation. A lower month-over-month number can mean inflation has ebbed, and therefore rates may decrease.
- Producer Price Index or PPI – In short, has the average price it costs businesses to produce the goods or services they provide increased or decreased? Like Core CPI, Core PPI strips out the more volatile food and energy prices. Also like CPI, PPI is an excellent predictor of inflation, and a lower month-over-month number can mean inflation has receded, possibly causing rates to decrease.
Want to know when these economic reports are released? I like to consult the Shirmeyer calendar – but be forewarned: if you’re not sure what you’re looking for, the calendar can be kinda overwhelming.
If you want more of my nerdy financial babble, e-mail me your questions at blog@quizzle.com. For personal, customized mortgage rates and loan options, try Quicken Loans spiffy new Mortgage Recommendation Calculator.