Pinellas Property Online

Economic data moved mortgage rates this week. Slower than expected economic growth data and tame inflation figures were favorable for mortgage markets. As a result, mortgage rates ended the week lower.

Heading into a Fed meeting next week, the low inflation data released this week means that there is little pressure on the Fed to begin raising the fed funds rate. May Core Consumer Price Index (CPI) inflation rose at a 0.9% annual rate, the lowest level in four decades. Usually the major task of Fed officials is to prevent inflation from moving too high, but they are now concerned about the risk that inflation will drop too low. Fed officials are most comfortable when inflation remains in the 1.5% to 2.0% range. This also means that there is little inflationary pressure to push mortgage rates higher. Of course, with expectations set so low, if inflation were to surprisingly increase in coming months, it could cause a large reaction in mortgage markets.

Freddie Mac said Thursday that the average rate rose to 4.79 percent, up from 4.78 percent last week. A year ago, the rate averaged 5.29 percent.

Rates dropped to a record low of 4.71 percent in December, pushed down by a Federal Reserve program that reduced borrowing costs for consumers. That campaign ended in March.

Rates have fallen further as investors, wary of European turmoil, shifted money into the safety of U.S. Treasury bonds. Mortgage rates tend to track the interest rates paid on long-term Treasury bonds.