Rising Mortgage Rate
The 10-year Treasury, the benchmark rate which mortgage rates are priced off, have risen significantly over the past month - from under 3 percent and now closely approaching 4 percent. Mortgage rates will follow similar patterns and could soon top 5.5 percent on a conforming 30-year fixed rate on average.
Despite the Federal Reserve’s efforts to keep mortgage rates down by directing the buying of mortgage backed securities, mortgage rates will rise if the world’s safest asset of government bond rates also rise. Rates on jumbo mortgages, which the Fed is not buying and are not covered by the government-backed Fannie and Freddie, remain elevated and will also turn upwards.
A way to keep the rates low would be to keep the bond vigilantes away. To do that would require the Fed to outline how it will mop up the printed money once the economy gets back on track. Also, President Obama can help by outlining in concrete terms how his administration plans to address the budget deficit once the economy shows growth.
Smacking the Future Federal Reserve Chairman
It would be somewhat unusual not to extend full allowable terms to a sitting Federal Reserve chairman. However, the rumor mill has whispered that current White House economic adviser Lawrence Summers could indeed be nominated to replace Ben Bernanke for a term to begin early next year.
The truly know-it-all Mr. Summers, who has President Obama’s ear most often on economic matters, is said to be getting smacked around by other members of the President’s economic team.
Right or wrong, Mr. Summers is known for his brusque in-your-face manners and often gets people irked. For this reason alone some believe he was not nominated as the Treasury Secretary. But the opportunity to demonstrate good manners while in the White House could have him set up as the nominee for the Federal Reserve chairmanship. Now, perhaps not?
Though this topic is irrelevant for the general public, the New York Times is showing tensions in the White House.
What does today’s data mean for REALTORS® and consumers?
Mortgage rates are almost certain to be higher this time next year. But the path is never a smooth line. So for homeowners looking to refinance and home buyers wanting to buy, try to lock-in on any temporary dips on rates. Higher rates will also slow down economic recovery.
Not only does WHAT one says matter, but HOW one says it also counts. REALTORS® often have only one chance to connect with a prospective client and HOW will count just as much as WHAT is said. A brusque style can invite a smacking-down.
Daily Forecast Update
NAR's monthly official forecast as of June 2nd
GDP Q2: - 1.2%
GDP Q3: +0.5%
GDP Q4: +0.9%
Unemployment rate by the end of 2009: 10.4%
Average 30-year fixed mortgage rate by the end of 2009: 5.5%
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