Here's some good news for the struggling US housing market: Thanks to the European debt crisis, mortgage rates are at historic lows.
The current average rate for a 30 year fixed loan is 4.87 percent, according to Bankrate.com. That's the lowest rate for the 30 years since Bankrate started keeping track 25 years ago.
Even jumbo loan rates-loans for more than $417,000-have fallen. The 30-year fixed jumbo loan is at an average rate of 4.5 percent, down from nearly 6 percent at this time last year.
"It's the best time in our generation to buy," says Mark Zandi, chief economist at Moody's. "It may be the best time in any generation. Mortgage rates are so low and with homes prices down and lots of inventory, you couldn't pick a better time to buy or re-finance."
Europe's debt crisis is behind the drop. Nervous investors are flocking to the security of US Treasurys, which pushes down their yield and influences a host of consumer interest rates-including those on mortgages.
The decline is also good news for homeowners looking to refinance, particularly those who owe more on their mortgage than their house is worth.
"There's a tremendous window on re-financing," says Greg McBride, chief economist at Bankrate.com. "That's particularly true for people who can take advantage of the government's Home Affordability Refinance Program (HARP)-which allows home owners to refinance into low mortgage interest rates even if they're property value has gone down."
HARP, which was due to end at the end of this June, now runs through June of 2011.
"Think of the benefits if you buy or refinance now," says McBride. "Locking in now at the lower rates means more more bang for the buck and more breathing room for homeowners when it comes to payments."
But the decline in rates probably won't last long, analysts say. So homeowners need to move fast.
"I think they won't last much longer than a month or two at the best," says Lawrence Yun, chief economist at the National Association of Realtors. "I can see them going up to 5.5 percent by the end of June if not sooner."
The reasons? Yun says the worries over Europe will be fading soon and investors will be looking at other assets besides US Treasurys. And there's the US deficit, which will push up Treasury yields.
"The US is fortunate now that there's no pressure on interest rates," Yun goes on to say. "But going forward, higher rates will be needed for financing the debt."
Zandi agrees. "Yes, I can't see these rates being this low in three to four weeks," Zandi says. "Investor's will settle down and this current crisis (Europe) will pass and the focus will be back on US debt. It's really a now or never type of proposition, when it comes to getting these types of historic rates."
Source: CNBC
Showing posts with label interest rates. Show all posts
Showing posts with label interest rates. Show all posts
Wednesday, June 9, 2010
Thursday, November 5, 2009
Fed Sees No Need to Raise Interest Rates Soon
The Federal Reserve signaled on Wednesday it was not close to raising interest rates, saying that the economy remained weak even though the recession appeared to be over.
The central bank said it would keep its benchmark interest rate at virtually zero, and it made no change to its longstanding mantra that economic conditions were likely to warrant “exceptionally low” rates for “an extended period.”
For practical purposes, analysts said, policy makers are still at least six months away from tightening monetary policy.
“Economic activity has continued to pick up,” the central bank said in a statement after its two-day policy meeting. But policy makers quickly cautioned consumer spending would be sluggish, businesses were still cutting back and economic growth would be “weak for a time.”
Despite speculation that the Fed might hint about raising interest rates in order to head off future inflation, it was unclear on Wednesday whether policy makers even discussed a change in the wording of their guidance.
Policy makers did elaborate on the economic indicators they will be watching most closely. Those will be the level of “resource utilization,” which primarily means the unemployment rate, the trend in inflation, and the stability of inflation expectations.
The government estimated last week that the nation’s economy grew at an annual pace of 3.5 percent in the third quarter, its first quarterly expansion in a year. But much of that activity stemmed from temporary stimulus measures like the home buyers’ tax credit and the “cash for clunkers” program.
The Fed chairman, Ben S. Bernanke, has cautioned that the recovery was fragile and that unemployment would remain high through the end of next year. The average forecast of Fed policy makers anticipates that the jobless rate, now 9.8 percent, will peak above 10 percent next year and remain well above 9 percent until some time in 2011.
Within the central bank, officials have begun debating when they should start signaling a rollback of its rescue measures. But while some of the Fed’s more hawkish policy makers have publicly suggested it might soon be time for tighter policy, Mr. Bernanke and other officials have made it clear they thought unemployment and slow growth were still the main economic threats.
The central bank did make a tiny reduction in its effort to prop up the mortgage market. It said it would buy slightly fewer bonds issued by agencies that guarantee home loans — $175 billion, rather than $200 billion it originally expected. But it said the change stemmed from a shortage of such securities. The Fed made no change to its much bigger program to buy $1.25 trillion worth of mortgage-backed securities by the end of next March.
“The one consistent theme with all the Fed speakers is that they’re not going to raise rates any time soon,” said Drew Matus, a senior economist at Bank of America-Merrill Lynch. “That is the one consistent theme that gets hammered home time and again.”
Beyond saying that “economic conditions” would continue to warrant “exceptionally low” rates, policy makers said those conditions included “low rates of resource utilization,” “subdued inflation trends” and “stable inflation expectations.”
Fed officials face competing challenges as they try to get monetary policy back to normal over the next several years. They need to make a judgment about timing — tightening too early could send the economy back into a downturn, as happened during the late 1930s; waiting too long would set the stage for inflation.
But policy makers also want to avoid jolting financial markets, which will require them to communicate their plans in advance. They are also grappling with novel questions about their exit strategy. In their statement on Wednesday, Fed officials made it clear they were still seeing little risk of higher inflation, adding that “substantial resource slack” — a euphemism for high unemployment and unused factory capacity — would keep inflation “subdued.”
The Fed’s preferred measure of inflation, which excludes prices of food and energy, has climbed by less than 1.5 percent over the last year, well within Mr. Bernanke’s unofficial comfort range of 1 to 2 percent.
The overnight Federal funds rate, the interest rate that banks charge for lending their reserves to each other, has been held between zero and 0.25 percent since last December.
In addition, the Fed has tried to pump up financial markets and the economy by more than doubling the size of its balance sheet, creating more than $1 trillion in new money for its emergency credit programs and to drive down long-term interest rates by buying Treasury bonds and mortgage-backed securities.
Fed officials have already cut back some of their emergency loan programs and stopped buying Treasury bonds, and they have said they would soon stop buying mortgage securities.
To tighten monetary policy, Fed officials will have to raise interest rates and start cutting the size of its balance sheet by selling the securities it has acquired.
By EDMUND L. ANDREWS
Published: November 4, 2009, New York Times
The central bank said it would keep its benchmark interest rate at virtually zero, and it made no change to its longstanding mantra that economic conditions were likely to warrant “exceptionally low” rates for “an extended period.”
For practical purposes, analysts said, policy makers are still at least six months away from tightening monetary policy.
“Economic activity has continued to pick up,” the central bank said in a statement after its two-day policy meeting. But policy makers quickly cautioned consumer spending would be sluggish, businesses were still cutting back and economic growth would be “weak for a time.”
Despite speculation that the Fed might hint about raising interest rates in order to head off future inflation, it was unclear on Wednesday whether policy makers even discussed a change in the wording of their guidance.
Policy makers did elaborate on the economic indicators they will be watching most closely. Those will be the level of “resource utilization,” which primarily means the unemployment rate, the trend in inflation, and the stability of inflation expectations.
The government estimated last week that the nation’s economy grew at an annual pace of 3.5 percent in the third quarter, its first quarterly expansion in a year. But much of that activity stemmed from temporary stimulus measures like the home buyers’ tax credit and the “cash for clunkers” program.
The Fed chairman, Ben S. Bernanke, has cautioned that the recovery was fragile and that unemployment would remain high through the end of next year. The average forecast of Fed policy makers anticipates that the jobless rate, now 9.8 percent, will peak above 10 percent next year and remain well above 9 percent until some time in 2011.
Within the central bank, officials have begun debating when they should start signaling a rollback of its rescue measures. But while some of the Fed’s more hawkish policy makers have publicly suggested it might soon be time for tighter policy, Mr. Bernanke and other officials have made it clear they thought unemployment and slow growth were still the main economic threats.
The central bank did make a tiny reduction in its effort to prop up the mortgage market. It said it would buy slightly fewer bonds issued by agencies that guarantee home loans — $175 billion, rather than $200 billion it originally expected. But it said the change stemmed from a shortage of such securities. The Fed made no change to its much bigger program to buy $1.25 trillion worth of mortgage-backed securities by the end of next March.
“The one consistent theme with all the Fed speakers is that they’re not going to raise rates any time soon,” said Drew Matus, a senior economist at Bank of America-Merrill Lynch. “That is the one consistent theme that gets hammered home time and again.”
Beyond saying that “economic conditions” would continue to warrant “exceptionally low” rates, policy makers said those conditions included “low rates of resource utilization,” “subdued inflation trends” and “stable inflation expectations.”
Fed officials face competing challenges as they try to get monetary policy back to normal over the next several years. They need to make a judgment about timing — tightening too early could send the economy back into a downturn, as happened during the late 1930s; waiting too long would set the stage for inflation.
But policy makers also want to avoid jolting financial markets, which will require them to communicate their plans in advance. They are also grappling with novel questions about their exit strategy. In their statement on Wednesday, Fed officials made it clear they were still seeing little risk of higher inflation, adding that “substantial resource slack” — a euphemism for high unemployment and unused factory capacity — would keep inflation “subdued.”
The Fed’s preferred measure of inflation, which excludes prices of food and energy, has climbed by less than 1.5 percent over the last year, well within Mr. Bernanke’s unofficial comfort range of 1 to 2 percent.
The overnight Federal funds rate, the interest rate that banks charge for lending their reserves to each other, has been held between zero and 0.25 percent since last December.
In addition, the Fed has tried to pump up financial markets and the economy by more than doubling the size of its balance sheet, creating more than $1 trillion in new money for its emergency credit programs and to drive down long-term interest rates by buying Treasury bonds and mortgage-backed securities.
Fed officials have already cut back some of their emergency loan programs and stopped buying Treasury bonds, and they have said they would soon stop buying mortgage securities.
To tighten monetary policy, Fed officials will have to raise interest rates and start cutting the size of its balance sheet by selling the securities it has acquired.
By EDMUND L. ANDREWS
Published: November 4, 2009, New York Times
Monday, September 28, 2009
Mortgage Rates Remain Low, Increasing Affordability
McLEAN, VA -- Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 5.04 percent with an average 0.6 point for the week ending September 24, 2009, unchanged from last week when it averaged 5.04 percent. Last year at this time, the 30-year FRM averaged 6.09 percent.
The 15-year FRM this week averaged 4.46 percent with an average 0.6 point, down from last week when it averaged 4.47 percent. A year ago at this time, the 15-year FRM averaged 5.77 percent. This is the lowest the 15-year FRM has been since Freddie Mac started tracking it in 1991.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.51 percent this week, with an average 0.5 point, unchanged from last week when it averaged 4.51 percent. A year ago, the 5-year ARM averaged 6.02 percent.
The one-year Treasury-indexed ARM averaged 4.52 percent this week with an average 0.6 point, down from last week when it averaged 4.58 percent. At this time last year, the 1-year ARM averaged 5.03 percent.
"Mortgage rates held relatively steady at three-month lows this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. Correspondingly, the Mortgage Bankers Association reported that mortgage applications jumped 12.8 percent over the week of September 18th to the strongest pace since late May, boosted by refinancing activity."
"In its September 23rd policy statement, the Federal Reserve (Fed) indicated that it plans to keep its benchmark interest rate exceptionally low for an extended period. This will likely benefit consumers who opt for ARMs, because they are typically tied to shorter-term interest rates. The Fed also noted that activity in the economy and housing market has picked up and financial markets have improved.”
Published: September 25, 2009
Realtytimes.com
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