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Greenspan Says Recovery is Building Momentum
By Michael Kraus on April 5, 2010

In an ABC interview this weekend, former Federal Reserve Chairman Alan Greenspan affirmed the Obama Adminstration’s view that the economy has turned around and is on the road to recovery. Greenspan said “There is a momentum building up which is really just beginning and it’s got a way to go”.

Greenspan continued “the momentum is very clearly there, and I doubt very much that we’re going to run out of that momentum until very late in the year”. Greenspan said that the chance of the economy re-entering a recession were greatly reduced.

The Obama Administration, while optimistic, cautioned Americans that unemployment will stay high as many frustrated job-seekers (who have given up searching for jobs and are not included in the unemployment rate) and long-term unemployed begin to seek work again. The White House warned that unemployment will go up before going back down.

8.4 million jobs were lost as a result of the recession, and it may be several years until they are replaced. Lawrence Summers, director of the National Economic Council remarked that “we’ve still got a long way to go”, but “the trend has turned”.

The stock market, which was closed on Friday, is rising as a result of Friday’s favorable job report. The Department of Labor reported that 162,000 jobs were created in March, the best report in three years. Yields on benchmarks also rose early Monday as a result of the news. As yields increase, interest rates and mortgage rates will also increase.

While mortgage rates are still low, many predict steady increases throughout the year, thirty year fixed mortgage rates could rise to 5.5% by the end of 2010. If you are looking to lock in a low interest rate before it is too late, speak to one of our mortgage experts at 877-868-2509 today.

Category: Mortgage Rates
Mortgage Rate Increase Presaged By Fed Move
1 By Michael Kraus on February 19, 2010

As anticipated, the Federal Reserve began the process of withdrawing some of the $1 trillion emergency stimulus money it has injected into the market since the beginning of the economic crisis.

Starting today, the Fed is raising the discount rate from .5% to .75%. The discount rate is the interest rate the Fed charges banks that borrow from the Fed when they are lacking liquidity. The Fed’s main policy tool is the federal funds rate, which is the rate banks charge each other on overnight loans. The federal funds rate largely determines interest rates on mortgages and other consumer loans.

Changing the discount rate is seen as a mostly symbolic gesture, a first step in withdrawing some of its support from the economy as the markets stabilize. Most analysts do not expect a rate hike until late 2010. In their press release after the rate change, Fed Chief Ben Bernanke said the change in discount rate does not “signal any change in the outlook for the economy or for monetary policy” and the changes “are not expected to lead to tighter financial conditions for households and businesses”. Bernanke also commented that there will not be a more widespread rate hike until the economy is “clearly in a sustainable recovery”.

St. Louis Federal Reserve Bank President James Bullard stated on Thursday that “the discount rate move is part of a normalization process, which is akin to our discontinuing many of our liquidity programs”. Despite these assurances, the federal funds futures market trading on Friday indicates that many expect at least one, if not two rate hikes in the coming year.

What does this mean for current mortgage rates? In the near future there probably will be little to no change. We should be cognizant that this move is probably the harbinger of an increase in mortgage rates in the coming year.

If you have a mortgage and have not yet refinanced, your time to take advantage of low rates is probably running out. To discuss refinancing or other mortgage related issues, please contact one of our mortgage specialists at 877-868-2503.

Category: Mortgage Rates
Treasury Bond Interest rates rise, mortgage rates to follow?
By Michael Kraus on February 18, 2010

Interest rates on ten year treasury bond rose Wednesday in the wake of good economic news and earnings reports. The Federal Reserve reported that industrial manufacturing went up last month for the seventh month in a row. Even though the Fed expects unemployment to remain high throughout 2010, they remain optimistic about the economic recovery. Housing starts also rose 2.8% in January.

At its January meeting, the Federal Reserve stated that it would hold interbank overnight rates between 0 and .25% and that it is committed to keeping rates low for “an extended period”. Fed officers do not believe that inflation is an immediate concern.

In January the Federal Reserve indicated that they would soon raise the discount rate, the Fed’s main tool for changing interest rates.

The yield on treasury notes expiring in February 2010 rose .08% on Wednesday. The yield on ten year treasury bonds is the basis for mortgage rates and the interest rates on other loans.

The machinations of the Federal Reserve are intentionally opaque, but all indicators seem to suggest that the historically low mortgage rates we have enjoyed recently are not going to last much longer. If you have a mortgage and have not refinanced, or are considering buying a new home, now is an excellent time to take advantage of record low rates. Call a Total Mortgage professional at 877-868-2503 to discuss your options today.

Category: Mortgage Rate Trends and Analysis
Home Construction Increases by 2.8% Nationally
By Robert Hyder on February 17, 2010

While the number of new homes being constructed increased in January by 2.8%, analysts are cautiously optimistic that this gain will be sustained as the housing construction industry rebounds from a prolonged slump. The U.S. Department of Commerce revealed this morning that the annual rate of new home constructions increased to 591,000 during the month of January, up from 575,000 in December, and more than 21% from January 2009. The elevated optimism is a result of the better-than-expected figures.

An overall positive outlook toward new home construction remains cloudy, however, as the number of building permits issued in January declined by 4.9% to an average annual rate of 621,000. The issuance of building permits is generally considered a reasonable indicator of impending home constructions. However, the decline in building permits also comes on the heels of two consecutive months of significant increases. And with snow on the ground in 49 states, severe winter weather across the nation certainly has hampered new home construction. But despite the unpredictable weather in the Northeast, new home construction increased by 10% in that area of the country. An 8.9% increase in new home construction in the West also served to strengthen the national figures. Therefore, the uptick in new home construction is even more inspiring for a sustained housing recovery. Bob Jones, the newly elected chairman of the Board of the National Association of Home Builders (NAHB) said builders are “lightly more optimistic that the housing recovery is finally beginning to take root.”

Prospective homeowners, including existing homeowners considering purchasing a larger home, can still benefit from the unprecedented tax credits offered by the federal government. First-time homebuyers are eligible for up to $8,000, while move-up homebuyers are eligible for up to $6,500. The federal tax credits are available to eligible borrowers until June 30, 2010 (with a signed purchase agreement by April 30, 2010). Coupled with historically low current mortgage rates, the federal tax credits offer a unique opportunity that will soon be gone. When the Federal Reserve completes its commitment to purchase $1.25 million in mortgage-backed securities by March 31, housing analysts believe current mortgage rates will begin to increase to as much as 6%.

â€“Robert Hyder

Category: General, Mortgage Rate Trends and Analysis, Purchase
Interest Rates, Mortgage Rates, Possibly on the Rise?
By Michael Kraus on February 8, 2010

Coming off the heels of the narrowest confirmation vote in the history of the Federal Reserve, many Fed watchers expect Chairman Ben Bernanke to unveil plans to raise interest rates in the coming year.

Despite being pilloried by many in the public and some lawmakers, Bernanke’s confirmation can be seen a (somewhat underwhelming) vote of confidence for Bernanke’s monetary policies. It also affirms the policy of autonomy of the Federal Reserve from political pressures.

During the recent economic crisis, the Fed took unprecedented steps to alleviate the situation. Short term interest rates were dropped to zero and trillions of dollars were injected into the economy in order to promote lending and save the banking system. As a result consumers have benefited from historically low mortgage rates. Current mortgage rates remain under 5% for many with good credit histories.

Bernanke is scheduled to give his semiannual monetary report to Congress later this month. He will outline the future Monetary Policy of the Fed and many observers feel rate hikes in order to curb inflation are inevitable.

Possible rate hikes are likely at least several months away as the Fed will wait until the economy is on more stable footing before it begins the process of siphoning the excess from the money supply. If it opts to raise rates, the Fed will be walking a tightrope with the hazard of inflation on one side and the risk of crushing the nascent economic recovery on the other side.

It is important to note that interest rate hikes are far from a sure thing. There are many factors, such as downturns in the housing market or increases in unemployment that could cause the Fed to change course.

The important takeaway is that despite the uncertainty about the near future, it appears the Federal Reserve intends to raise interest rates. The current historic nadir of mortgage rates will not remain for much longer, which makes now a better time than ever to refinance your current mortgage or to purchase a new home.

For more information on Bernanke’s Confirmation and the future of interest and mortgage rates, check out these recent articles from the New York Times and Wall Street Journal.

Category: Current Mortgage Rates, Mortgage Rate Trends and Analysis