J.BermanGroup Market Update: Week of February 9, 2009

Category: Mortgage Rates

Posted on in Mortgage Rates

J.BermanGroup Market Update: Week of February 9, 2009

Despite a weakening employment outlook for Americans, the economy flashed signs of a rebirth last week.  It wasn’t enough to reverse the recent mortgage rate trend, however. For the fourth week in a row, mortgage rates increased, if only slightly. The biggest story of last week was the revelation that 2.5 million jobs have been lost since Labor Day.  Strangely, this data may lead to two boosts toward a market recovery in the days ahead. Monday, the Senate is expected to vote on an $820 billion stimulus package Tuesday, Treasury Secretary Geithner is expected to outline a bank recovery program Both of these events figure to be heavily influenced by the number of out-of-work Americans and the pressure to restore confidence in the U.S. economy.  We learned last week that Americans have moved from spenders to savers, after all, and in the absence of consumer spending, an economy is hard-pressed to expand. In other words, rising unemployment is putting pressure on Capitol Hill and […]

by jberman
Posted on in Mortgage Rates

In Plain English: The Federal Reserve (December 16th, 2008)

The Federal Open Market Committee voted to cut the Fed Funds Rate by at least three-quarters percent today. The benchmark rate now rests in a range of 0.000-0.250 percent. In its press release, the FOMC identified three key economic sectors in which activity has weakened since October. The FOMC noted that: The U.S. job market is deteriorating Consumer spending levels are falling Business investment is contracting nationwide The Fed intends its rate cut to provide stimulate to each of these areas. In addition, the voting members of the FOMC singled out inflation as a diminishing threat to the economy. This is an important admission because it’s well-known that cuts to the Fed Funds Rate can spark inflation. Rapidly falling oil prices and commodity costs, therefore, likely paved the way for today’s historic cut. In its announcement to markets, the Fed gave The People what they wanted — a reassurance that the policy-making group would “employ all available tools” to help […]

by jberman
Posted on in Mortgage Rates

Mortgage Rates Don’t Always Follow Lower Fed Funds Rates

The Federal Open Market Committee adjourns from its 2-day meeting at 2:15 P.M. ET today. It’s widely expected that the Ben Bernanke-led FOMC will reduce the Fed Funds Rate by a half-percent to 0.500 percent. Fed Funds Rate cuts are meant to stimulate the economy by lowering borrowing costs for businesses and consumers; interest rates on business credit lines and consumer credit cards are directly tied to the benchmark rate. However, it won’t be what the Fed does today that will be as important as what the Fed says. And the markets are listening closely. See, this FOMC meeting was originally scheduled to last 1 day but on November 20, it was extended to 2. Presumably, the extra day was meant to give the FOMC a chance to review its options, but now it has the markets expecting “something big”. Wall Street wants Bernanke to outline credit-extenstion plan for banks, businesses and consumers. It wants the Fed to bolster markets […]

by jberman
Posted on in Mortgage Rates

Fixed Rate Mortgages Priced Better than ARM’s

It’s the age-old question for home buyers in need of a mortgage: Which is better: Fixed or ARM? Historically, the answer has hinged on a homebuyer’s desire to meet one of two mutually-exclusive mortgage financing goals: Get low mortgage payments for better cash flow Get long-term payment stability for better budget planning But because of government intervention and lingering questions about the economy, fixed-rate mortgages are now pricing cheaper than their adjustable-rate counterparts. Based on today’s mortgage market, therefore, home buyers can get both. Versus a comparable 5-year ARM, conforming fixed-mortgage rates are priced roughly 0.250 percent lower and have been over the past 23 days. The quarter-percent difference equates to $33 saved per month on a $200,000 home loan. Mortgage markets are ever-changing so rates we can’t know if this pricing anomaly will last. But, while it does, the decision to choose Fixed over ARM is a lot simpler.

by jberman
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