After meeting for the last two days, Ben Bernanke spoke to the media with a summary of the key points covered. Here's a recap of today's Fed speak:
1. The Feds will leave overnight lending rates unchanged at between 0%-.25%, probably for at least the rest of 2009. For those of you with any debt tied to the prime rate (currently at 3.25%), this means no change in that rate or in those payments. NOTE: Mortgages are almost never tied to the prime rate. They are more likely to be tied to the LIBOR (London Interbank Offer Rate) index, and most specifically the 6 month LIBOR rate for most mortgages. The 6 month LIBOR is currently at 1.16%. ARM loans tied to the LIBOR will feel the effects of a rising LIBOR index only at the time of each payment adjustment.
However, if you have a variable rate HELOC (Home Equity Line of Credit), this type of loan is almost always tied to the prime rate. The good news for you is that your low monthly rate and payments will remain unchanged for now.
2. Bernanke also mentioned that the Feds are watching to see how quickly the economy will recover on its own. He said:
"The pace of the economic contraction is slowing."
"Conditions in the financial markets are improving."
Bernanke disappointed Wall Street, and all of us in the housing industry by failing to say that the Feds will resume purchases of Mortgage backed securities. This failure caused the yield on the 10 year bond to rise, and mortgage rates to rise with the yield. Currently the 30 year mortgage is averaging a rate of 5.38% nationally. That's substantially higher than just a month ago, when we saw rates below 5%, but slightly below the high we saw last week at closer to 5.6%.
A government report released today showed an unexpected increase in durable goods orders (refrigerators, televisions, computers, etc.) , but at the same time, an increase in unemployment nationally.
Ben Bernanke is walking a tightrope of a sort. Trying to move our economy into recovery mode after the worst recession in 5 decades is almost unprecedented with the powers the Feds have been assigned. And, his appointment to Chairman of the FOMC will expire shortly. There is considerable debate on whether or not he will be re-appointed. President Obama pretty much deflected the question at a recent news conference. While Bernanke was appointed by his predecessor, this is a pretty tough spot to insert a new key player.
I said my mantra last night for lower rates, but apparently the powers that be weren't listening. Can we hope for a delayed reaction? Again, I think that a key factor in whether or not the Feds will resume purchases of Mortgage backed securities will rest on the effect of the higher interest rates on the housing market recovery. Those numbers won't be released until mid-late July.
Speaking of the housing market recovery - other news released today was that sales of new homes decreased in May, but prices for those homes increased. Are we surprised then that those sales decreased?
Here's more news:
The average price of homes that are selling is at $173,000 - $200,000 nationwide.
The current inventory of homes that qualify for conforming loans (at or below $417,000) is at 9+ months nationwide.
The current inventory of homes priced at $1,000,000+ is at 8+ YEARS!!
Builders take note - the buyers out there are snapping up the lower end of the price range. If you are building, you have to keep this in mind! Home buyers are following the trends seen in the retail stores. Walmart and Kohls are thriving during this economic downturn, while Nordstom, Saks, Tiffanys, etc., are all feeling the pinch. Those who have money are holding onto it.
OK - that's it for today.
Tomorrow I will focus on what you can do to qualify for the best mortgage rates out there, and why some of you, even with good credit, are still looking at higher rates.
Enjoy the rest of your afternoons and evenings.
Best regards,
Shelby Bateson
Town & Country Mortgage
10228 SW Capitol Highway
Portland, OR 97219
503-819-6545 phone
Lic # ML-3604
http://www.shelbytncmortgage.com/
* Best rates apply to borrowers with Loan to Value at or below 90% and credit scores of 740+. ** Best FHA rates apply to credit scores of 660 and up. There are upward rate adjustments for lower credit scores on all loan programs. All rates are subject to change without notice. These rates are NOT APRs - do not include closing costs.
1. The Feds will leave overnight lending rates unchanged at between 0%-.25%, probably for at least the rest of 2009. For those of you with any debt tied to the prime rate (currently at 3.25%), this means no change in that rate or in those payments. NOTE: Mortgages are almost never tied to the prime rate. They are more likely to be tied to the LIBOR (London Interbank Offer Rate) index, and most specifically the 6 month LIBOR rate for most mortgages. The 6 month LIBOR is currently at 1.16%. ARM loans tied to the LIBOR will feel the effects of a rising LIBOR index only at the time of each payment adjustment.
However, if you have a variable rate HELOC (Home Equity Line of Credit), this type of loan is almost always tied to the prime rate. The good news for you is that your low monthly rate and payments will remain unchanged for now.
2. Bernanke also mentioned that the Feds are watching to see how quickly the economy will recover on its own. He said:
"The pace of the economic contraction is slowing."
"Conditions in the financial markets are improving."
Bernanke disappointed Wall Street, and all of us in the housing industry by failing to say that the Feds will resume purchases of Mortgage backed securities. This failure caused the yield on the 10 year bond to rise, and mortgage rates to rise with the yield. Currently the 30 year mortgage is averaging a rate of 5.38% nationally. That's substantially higher than just a month ago, when we saw rates below 5%, but slightly below the high we saw last week at closer to 5.6%.
A government report released today showed an unexpected increase in durable goods orders (refrigerators, televisions, computers, etc.) , but at the same time, an increase in unemployment nationally.
Ben Bernanke is walking a tightrope of a sort. Trying to move our economy into recovery mode after the worst recession in 5 decades is almost unprecedented with the powers the Feds have been assigned. And, his appointment to Chairman of the FOMC will expire shortly. There is considerable debate on whether or not he will be re-appointed. President Obama pretty much deflected the question at a recent news conference. While Bernanke was appointed by his predecessor, this is a pretty tough spot to insert a new key player.
I said my mantra last night for lower rates, but apparently the powers that be weren't listening. Can we hope for a delayed reaction? Again, I think that a key factor in whether or not the Feds will resume purchases of Mortgage backed securities will rest on the effect of the higher interest rates on the housing market recovery. Those numbers won't be released until mid-late July.
Speaking of the housing market recovery - other news released today was that sales of new homes decreased in May, but prices for those homes increased. Are we surprised then that those sales decreased?
Here's more news:
The average price of homes that are selling is at $173,000 - $200,000 nationwide.
The current inventory of homes that qualify for conforming loans (at or below $417,000) is at 9+ months nationwide.
The current inventory of homes priced at $1,000,000+ is at 8+ YEARS!!
Builders take note - the buyers out there are snapping up the lower end of the price range. If you are building, you have to keep this in mind! Home buyers are following the trends seen in the retail stores. Walmart and Kohls are thriving during this economic downturn, while Nordstom, Saks, Tiffanys, etc., are all feeling the pinch. Those who have money are holding onto it.
OK - that's it for today.
Tomorrow I will focus on what you can do to qualify for the best mortgage rates out there, and why some of you, even with good credit, are still looking at higher rates.
Enjoy the rest of your afternoons and evenings.
Best regards,
Shelby Bateson
Town & Country Mortgage
10228 SW Capitol Highway
Portland, OR 97219
503-819-6545 phone
Lic # ML-3604
http://www.shelbytncmortgage.com/
* Best rates apply to borrowers with Loan to Value at or below 90% and credit scores of 740+. ** Best FHA rates apply to credit scores of 660 and up. There are upward rate adjustments for lower credit scores on all loan programs. All rates are subject to change without notice. These rates are NOT APRs - do not include closing costs.
No comments:
Post a Comment