ArchivesHe felt that although personl spending has been propping up the economy, he feels that personal spending will moderate. He believes that many people are spending using their home as an asset, but that will change. With property values in some areas declining and as credit requirements for mortgages and home equity loans become more restrictive, it will become increasingly more difficult for homeowners to borrow their equity and then spend it.
Due to the impact this change in personal spending will have on the economy, he felt that the Federal Reserve will have to continue to reduce interest rates. His opinion was that 30 year fixed rates might drop into the 5.0% - 5.5% range. I hope he's right. Rates at that level would be good for everyone. Have a great Monday!
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( 3 / 1879 )The Labor Department's October Nonfarm Payroll Report showed an increase of 166,000 new jobs for the month. This was almost double analysts expectations and caused the bond market to lose ground. Oddly enough, however, it started to rally and recovered its early losses and ended the day up a couple of basis points. Normally, a large Jobs Report is bad for interest rates because it means that the economy is growing and that the Fed doesn't need to help it along with rate cuts. The rally could be an indication that bond traders feel the Labor Department made a mistake in their survey and we didn't really see 166,000 new jobs created last month.
Enjoy the extra hour of sleep. Have a great weekend.
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( 3 / 1929 )As everyone probably knows, the Federal Reserve has chosen to reduce both the Fed Funds rate and the Fed Discount rate by .25%. This decrease will translate into a .25% decrease int the Prime Rate, which we will then see in Home Equity Lines of Credit (HELOC) over the next 30 days.
The news was greeted positively by stocks. This morning, however, is a different story. The Dow is down roughly 200 points, while the Nasdaq has been down more than 35.
Mortgage bonds have responded in just the opposite manner. Prior to the release of the news, there was a small rally, but then mortgage bonds experienced a sell-off on the news which caused them to close the day down 33 basis points. This morning, they have recovered half of yesterdays' losses, which translates into a 1/8 - 1/4 point (not percent) increase from lenders.
On purchase transactions, points are paid out of pocket at the time of settlement. On a $100,000 mortgage, one point is equal to 1.0% of the loan amount, or $1,000. A 1/4 point is then equal to $250. If you spread that over 30 years or 360 months, it would cost $0.69 per month.
As you can see, the Fed's action was basically a non-event for mortgage rates. Have a great Thursday.
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( 3 / 1994 )Today is the second day of the Federal Reserve meeting and most everyone is anxiously awaitng their decision regarding the Fed Funds and Fed Discount rates. The Fed releases this info at 2pm. The marketwide opinion is that they will cut rates .25% on the Fed Funds.
At 2pm, they also release their policy statement, which is a glimpse into what we may expect from them in the near future.
Cross your fingers and hope for a double dose of good news.
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( 3 / 1570 )Countrywide announced they would lose 1.2 billon dollars in the third quarter. The loss should come as no surprise, considering that they are the nations largest mortgage lender and have been in the news throughout the last few months detailing the amount of bads loans on their books.
They have drawn down all of their lines of credit, which totalled about $11 billion and then they received an infusion of cash from Bank of America in the amount of roughly 2 billion.
In light of all of this bad news, Countrywide did say they expect to show a profit in the fourth quarter, due to a reduction in labor costs, among other things. If they are able to go from such a huge loss back to profitability in a quarter, I think it bodes well for the mortgage industry and the housing market. I guess we'll see.
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