Mortgage investors gave this morning's Labor Department report indicating inflation at the nation's factory gates rose at a stronger-than-expected pace little more than a passing glance.


The specifics of the July Producer Price Index showed overall prices were higher by 0.2% following a 0.4% drop in June. The core rate of inflation at the producer level, a value which strips out the more volatile food and energy costs, rose by 0.4% -- double most economists' expectations and the largest single monthly increase for this measure of inflation since January.



A jobless rate of 9.0+% continues to take a major toll on salaries and wages which in-turn crimps consumer spending. As long as the labor market remains weak -- it is highly unlikely businesses will find the pricing power necessary to pass their rising raw material costs through to consumers.



If tomorrow morning's 8:30 a.m. ET July Consumer Price Index confirms this assessment -- the report will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. In the off-chance the core rate of the July Consumer Price Index posts a reading of 0.3% or higher -- expect mortgage investors to respond by pushing rates higher in tomorrow's early going.



As they do every Wednesday, the Mortgage Bankers of America have released their weekly mortgage application survey numbers for the five-business-day period ended August 12th. The composite index gained 4.1% from the previous week, driven entirely by a huge surge in refinance requests. Refinance loan demand was up 8.0% on a week-over-week basis while request for purchase money mortgages fell 9.1%.
The contract rate for 30-year fixed-rate mortgages finished the week at 4.32%, down 5basis-points from the prior week, down 22 basis-points from the month-ago mark, and down 28 basis-points from the year-ago level.



Refinance applications accounted for eight of every ten loan applications taken last week by lenders across the country.