If Inflation Is Starting to Pop, It's Time to Act On Mortgage DecisionsBy Richard Barrington
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Most of us don't have the luxury of basing our first mortgage on macroeconomic factors. Basically, when we find a house we like and can afford, we act as quickly as possible.
If you are considering a home equity mortgage, you'll want to keep an eye on inflation.
Inflation and Mortgage RatesInflation is a key driver of mortgage rates. If inflation is trending upward, typically you will see mortgage rates moving in the same direction.
Recently, there have been some ominous signs on the inflation front. The preliminary release for the Producer Price Index (PPI) for March, 2007 was 1.0%--a very high reading, and on the heels of another high reading of 1.3% for February. Enough pressure from producer prices will eventually affect consumer prices, and in turn, mortgage rates.
Act Now If Inflation Is Starting To PopIndividual inflation readings are notoriously erratic, and year-over-year, the change in PPI is a very reasonable 3.1%. It's a little like popcorn -- if you hear one pop, it doesn't mean much. But once you start hearing one pop after another, you know it's starting to cook.
Anyone considering a home equity mortgage should be vigilant for any further signs of inflation, and if you suspect the popcorn is starting to pop, act quickly. Once inflation starts to cook, it is only a matter of time before mortgage rates heat up as well.
About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.
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