Refinance rates could fall further following fed rate cuts
The fed agressively cut the fed funds rate by 3/4 of a point today, dropping the rate to .25%, the lowest level of all time. The historic move was a bold move to try and spur a rebound in the economy. The stock market reacted positively and rallied over 350 pts on the news. The news should be welcome to home owners on several fronts. Home owners with home equity loans that are tied into prime will see an immediate reduction to to their payments following the move. Mortgage rates could also benefit from this as well as the Fed is believed to be ramping up other programs to help bring down rates further. Consumers who are looking to refinance their mortgage should be aware that the fed move does not directly relate to how mortgage lenders price their mortgage loans.
The fed also indicated they are looking to make some agressive moves to help shore up the housing market. The move to lower the fed funds rate essentially eliminates the Fed’s ability to lower rates in the future. The fed has been forced to make bold moves primarily as they are focussed on trying to improve liquidity to the credit markets. Consumer confidence may benefit from this move as the perception is that the Fed will take whatever steps are necessary to try and fix the economy.
Consumers benefit from low gas prices and great refinance rates
The american consumer who is the backbone to the economy has taken a lot of blows this year as they struggle to find a bottom to the sagging economy. The recent report on the job market showed a net loss of over 500,000 jobs for the month of November, a staggering number that could continue to grow. There are a few silver linings in today’s economic climate. The dramatic fall out of the stock market has helped to bring down mortgage interest rates to near historic lows. Consumers are benefiting with refinance rates that have not been seen since January of this year. The lower house payments could help to pump some additional income back into the economy. The rapid drop in oil prices is also going to save the average consumer in excess of $50 per month, at a time when this is desperately needed.
The market is very tied into the bailout loan proposals for the auto industry and the anticipation of the President elect Obama’s capital expenditure program. The market could continue to benefit with low rate mortgage loans as the government works in overdrive to try and jumpstart the housing market.
Stocks get slammed as Best Buy warns
The stock market took another blow on Wednesday as Best Buy warned that they have seen a sharp decline in sales in their retail stores. The stock market dropped another 2% on the negative news as investors are concerned that holiday sales could be way off target.
The market is also digesting news out of the TARP progam as Secretary Paulson reviewed progress and future plans for the program. The program will now provide some relief for student loan lenders, credit card companies, auto loan companies and other key financial players who provide capital for the general public. There are hundreds of companies lining up trying to gain access to the TARP’s funds as companies view this as a necessary lifeline to stay in business. American Express has received authorization to become a bank holding company and is rumored to be looking for as much as 3.5 billion dollars worth of loans. There does not appear to be funding earmarked for auto companies, yet there is likely to be seperate legislation to address this in the near future.
The ten year bond is hovering around 3.67%, fixed mortgage rates have moved slightly lower with all of the economic news. Auto loan financing is large challenge in todays market and could get a boost if funds are earmarked for the auto industry.
Mortgage rates move lower following the elections
Mortgage rates have dropped following the elections in the U.S. as the stock market has moved lower following a rapid rise in many equity positions over the last two weeks. The average rate on a thirty year fixed rate loan was at 6.2% according to a recent report from Freddie Mac, the nations second largest agency lender.
The stock market has dropped sharply as investors are again focussing on corporate earnings and economic reports that clearly indicate the economy is struggling with numerous issues. The Bank of England dropped their funding rates by 1.5% in an effort to try and prop up the economy and improve liquidity in Great Britain. World markets in Europe and Asia have dropped sharply as more large corporations are reporting dismal outlook for earnings growth in the near future. Stocks have been beaten down in many sectors as the market is off over 30% year to date, despite rallying off of the lows from October.
Consumers who are shopping for a mortgage could benefit from the recent drop in the stock market and improving credit markets to secure a new mortgage in the lower six percent range. The U.S. housing market is beginning to show signs of a bottom as lenders have agressively moved to slow down home foreclosures.
Mortgage rates move up as stock market rallies
The stock market had a solid week of gains for the first time in the past sixty days. The market breathed a bit easier after solid earnings from key financial companies such as JP Morgan Chase and Wells Fargo helped to reassure the financials that the banking industry was still capable of being profitable. The yield on the ten year bond jumped almost thirty basis points for the week as the ten year adjusted from 3.8 up to near 4.1% on Friday. The net effect is that fixed mortgage rates moved up approximately 3/8 of a percent with most mortgage lenders.
This year has been a roller coaster ride for both the stock market and mortgage rates. The rapid decline in oil prices this week could help to bring mortgage rates lower in the near future if the trend continues as this will help to ease up some of the inflationary pressures in the market. Corporate earnings have already been damaged by high energy prices, but certain industries are likely to continue to see some improvements, such as banking, which has build in a good portion of their losses from the mortgage credit crunch to date.