Monthly Archives: July 2011
Mortgage Rate Outlook for Week of July 18, 2011
| July 18, 2011 | Posted by Tammy under Mortgage News |
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Mortgage rates continued lower last week fueled by concerns regarding employment and statements made in the June Federal Open Market Committee (FOMC) minutes regarding market weakness. The consensus among the majority of the recently released market data and the FOMC minutes is that the overall recovery is still a work in progress and the levels of GDP growth needed to fuel a healthy economy are still a ways off. This is good news for mortgage bad news for the economy as a whole.
Economic Calendar for Week of July 18, 2011
- Monday – NAHB Housing Market Index
- Tuesday – Housing Starts
- Wednesday – Existing Home Sales
- Thursday – Initial Claims, Philadelphia Fed, Leading Indicators
Mortgage rates have been been held down for weeks as bad economic data has driven bond prices up creating a unique and very likely last chance for home owners and buyers to take advantage of extremely low rates. The concern is that once this window closes and rates begin their inevitable move up, there will be no going back, which means that once the opportunity is gone, it’s gone for good. We can help you understand if you are in or getting into the best mortgage for your needs, please contact us for a free consultation.
Economic Worries Translate Into Low Consumer Confidence and Low Mortgage Rates
| July 15, 2011 | Posted by Tammy under Mortgage Rates |
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The University of Michigan’s / Thomson Reuters widely-watched consumer confidence index shows consumer confidence moving lower driven by lack of confidence in government economic policies and increasing pessimism over unemployment, home prices and falling income. The index fell 7.7 points to 63.8, its biggest decline since March with the index falling to 76.3 from 82.0, the lowest reading since November of 2009.
One issue at the forefront of eroding consumer confidence is the impending budget deal debacle which will decide the fate of whether or not the US debt ceiling can be increased, allowing the United States to continue funding its monthly obligations.
Adding to consumer anxiety is credit rating agency Standard & Poor’s statements this week that there is a 50 per cent chance it will downgrade the U.S. government’s credit rating within three months because of the congressional infighting over approving an increase in the debt ceiling. The rating agency has placed the United States on a credit watch, not good news for the economy or consumers.
FED Chairman Ben S. Bernanke in Semiannual Monetary Policy Report to the Congress:
Much of the slowdown in aggregate demand this year has been centered in the household sector, and the ability and willingness of consumers to spend will be an important determinant of the pace of the recovery in coming quarters. Real disposable personal income over the first five months of 2011 was boosted by the reduction in payroll taxes, but those gains were largely offset by higher prices for gasoline and other commodities. Households report that they have little confidence in the durability of the recovery and about their own income prospects. Moreover, the ongoing weakness in home values is holding down household wealth and weighing on consumer sentiment. On the positive side, household debt burdens are declining, delinquency rates on credit card and auto loans are down significantly, and the number of homeowners missing a mortgage payment for the first time is decreasing. The anticipated pickups in economic activity and job creation, together with the expected easing of price pressures, should bolster real household income, confidence, and spending in the medium run.
The silver lining for mortgage rates is that bad economic news results in lower or depressed mortgage rates. We can help you decide if you in the best mortgage for your needs or if a lower rate is available. Please contact us today for your free existing or future mortgage consultation.
Federal Reserve Minutes Indicate Higher Mortgage Rates Coming
| July 13, 2011 | Posted by Tammy under Mortgage News |
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The Federal Reserve released notes from the June 21-22 Federal Open Market Committee (FOMC) meeting on Tuesday, shedding light on the FOMC’s current observations of the market and how it will be adjusting its activities moving forward. This release of minutes is one of eight releases the Fed meets, following each of the eight Fed meetings that take place each year.
The minutes didn’t drop any bombshells that have had any significant immediate impact on mortgage rates, but did provide useful insight on how the Fed will be adjusting its activities, which will affect how mortgage rates move in the future. The market and mortgage rates as a whole were largely unmoved release of the minutes.
The Fed overview on the current state of the market shows that recovery has been slower than expected and that housing prices remain depressed, both factors holding back the overall recovery of the economy.
From the June 2011 FOMC Minutes:
Activity in the housing market remained depressed, as both weak demand and the sizable inventory of foreclosed or distressed properties continued to hold back new construction. Starts and permits of new single-family homes were essentially unchanged in April and May, and they stayed near the very low levels seen since the middle of last year. Sales of new and existing homes remained at subdued levels in recent months, while measures of home prices fell further.
Since the Fed sets monetary policy and participates in other activities such as buying Treasury debt, their activities can significantly impact the mortgage rates and the economy as a whole. As the Fed has implemented various policies to help push the economy out of recession, maintaining these policies for an extended period of time can do more damage than good. The June minutes provided some insight into how the Fed will unwind or exit some of these policies moving forward.
Fed Exit Strategy Principles
- The Fed will raise the Fed Funds Rate (the rate at which banks lend each other money overnight)
- The Fed will stop buying Treasury Debt (they are currently reinvesting the proceeds on existing obligations)
- The Fed will sell its holdings in mortgage-backed securities
Since rates are currently at very low levels, there is a lot more room for rates to go up then go down. That means that now is a great time to inquire about whether your existing mortgage is the best fit for you or to learn about your options if you are considering purchasing a home.
Recurring Closing Costs: Costs of Buying and Maintaining Your Home
| July 12, 2011 | Posted by Tammy under Closing Costs |
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When you purchase a home for the first time, there are some expenses to keep in mind that you may not be aware of that you are responsible for when you close on your home. Closing costs typically total 3% to 6% of the purchase price of a home. The recurring closing costs outlined below are not only applicable when you close but have to be paid on an ongoing basis after you take possession of your new home.
Recurring Closing Costs
These are the costs that you may have to pay out at closing, but that you’ll also be responsible for on an ongoing basis as a home owner.
- Property Tax - This will be paid at closing if the seller has pre-paid any of the property taxes for the period after you take possession of the home. If your mortgage lender requires that you put your property taxes in escrow, one or two month’s payments may also be required at closing.
- Mortgage Insurance - If you’ve taken out a high ratio mortgage (with less than 20% down) you may be required to have it insured. You may need to pay the full premium upfront or just the taxes. The same applies if you choose to take creditor protection to help you with your mortgage in case of illness or death.
- Home Owner’s Insurance – To protect you against fire or flood, at the time of closing you will be required to prove that you have insurance in place. Some lenders will require that you pre-pay premiums for the whole year.
If you have any questions about recurring closing costs or any other mortgage related questions, we can help! Please contact us for a free mortgage consultation.
Mortgage Rates Move Lower on Weak Jobs Data
| July 8, 2011 | Posted by Tammy under Mortgage News |
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The Bureau of Labor Statistics released unexptected employment data this morning in the form of the “Jobs Report” resulting in a decrease in mortgage rates. Mortgage rates are senstiive to the jobs report because jobs are what provide the income that is spent to power the economy.
The data released showed that Nonfarm payroll employment was essentially unchanged in June (increase of 18,000 jobs, lower than expected), and the unemployment rate was little changed at 9.2 percent. Since the market was expecting higher job growth, the data was disappointing, which is good for mortgage rates.
From the Bureau of Labor Statistics Report:
The number of unemployed persons (14.1 million) and the unemployment rate (9.2
percent) were essentially unchanged over the month. Since March, the number of
unemployed persons has increased by 545,000, and the unemployment rate has
risen by 0.4 percentage point. The labor force, at 153.4 million, changed
little over the month.
Mortgage rates are once again at extremely low levels due to weaker than expected economic data. This means that although rates were expected to have moved higher by now, we have a little bit more time to lock in low rates at their current levels. If you need help determining if you can benefit from the low rates available today, we can help!
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