Mortgage Rates Nearly Level

Mortgage rates finished last week basically unchanged. The producer price index showed a healthy 5.4% increase in 2005 due mostly to rising energy costs. Factoring out food and energy, the PPI rose only 1.7%. This indicates that inflation is still in check and should be good news for interest rates as we move into 2006.

This week's big news will be the release of the Consumer Price Index on Wednesday. This will give further indication of whether the Fed's efforts to keep inflation under control are working. The stock market continues to fight to keep the Dow above the 11,000 mark and the bond markets will attempt to keep a run above the 100 day moving average for the first time in over a year.

Continued strength in the stock market could be bad news for bonds and mortgage rates. A stock rally could cause funds to flow out of bonds which would cause a rise in interest rates.