December 15th, 2015 11:35 AM by Dale DiGennaro
Oil Prices Fall
Mortgage rates are affected by many different market forces. Often it is economic data and its impact on the outlook for inflation. This week, the biggest influence on mortgage rates came from the drop in the price of oil and its effects on the stock market. Stocks declined, and mortgage rates ended the week a little lower.
The price of oil declined during the week to the lowest level in seven years. This is great for consumers, but has mixed effects on financial markets. The drop weighed heavily on energy stocks and concerns spread throughout the broader stock market. Investors sold stocks and bought safer investments like government-backed mortgage-backed securities (MBS). The added demand for MBS pushed mortgage rates lower.
With more cash in their pockets from lower gas prices, consumer spending in other areas showed solid improvement in November. After three disappointing months, retail sales, excluding volatile auto sales, rose nicely. Consumer spending accounts for about 70% of economic output in the U.S., and the retail sales data is a key indicator.
Next week, the highly anticipated Fed meeting will take place on Wednesday. If the Fed raises the federal funds rate as widely expected, investors will be looking for guidance about the pace of future rate hikes. Before that, the consumer price index (CPI), the most closely watched monthly inflation report, will come out on Tuesday. Industrial Production, an important indicator of economic activity, and Housing Starts will be released on Wednesday.