Interest Rate Update – May 29 May 29, 2009

Below are the interest rates along with some VERY important comments & developments from FHA regarding the use of the $8000 tax credit as a down payment. 

 

 

CONFORMING
30 Yr   4.75%
15 Yr   4.375

 

ARMS
3 Yr   3.5%
5 Yr   4.0
7 Yr   4.125

 

JUMBO
30 Yr   6.30%
15 Yr   5.55
5 Yr ARM  4.95%
7 Yr ARM  5.65

 

FHA/VA
30 Yr   5.0%
15 Yr   4.75
3 Yr ARM  3.5%
5 Yr ARM  3.625

 

Market Comments -

 
In economic headlines, the 1st Quarter Gross Domestic Product (GDP) – which measures the total goods and services output within US borders – came in close to estimates at a revised rate of -5.7%, following 4th Quarter 2008 shrinkage of -6.3%.  GDP has now declined for three straight quarters for the first time since 1974-1975…and the contraction on the last two quarters is the worst in over 60 years.  We feel the worst is behind us, but it will take more time for the economy to fully recover.

 

The manufacturing sector is still a bit beleaguered, as the Chicago Purchasing Managers Index was reported at 39.0, lower than expectations of 42.0.  On the other hand, Consumer Sentiment came in a bit better than expected with a read of 68.7, showing that consumers are beginning to feel better about their economic prospects ahead.

 

Oil continues to gush higher hitting nearly $67 a barrel this morning.  A direct result of a weakening US Dollar, caused by concerns over the massive debt being issued.  This is going to cause prices to rise at the pump and unfortunately weigh on the consumer further during a time when we need consumer spending to pick up and help revive the economy.

 

The New York Fed purchased $25.5B in Mortgage Backed Securities in the latest week bringing the year-to-date total to $481B out of the $1.25T allotted.  The coupons were in the 4% to 5.5% range with no purchases of the 3% to 3.5%.  It is clear to us that the Fed’s buying is not reactionary to market conditions, otherwise the Fed would have likely stepped up the purchases this past week to try and stem the steep losses in Mortgage Bonds.

 

The recent losses in Mortgage Bonds have pushed home loan rates solidly back above 5%…and this may concern the Fed, as with rates at this level, refinance activity will stop, and it could even have a negative impact on the lagging purchase market.  It would not surprise us to see the Fed come out with an announcement that they would commit even more money to purchase both Mortgage Backed-Securities and longer-term Treasuries in an effort to keep interest rates low for a longer amount of time.  Remember, each of the last two times the Fed made an announcement, pricing improved sharply and the Fed never actually invested any money, they just said they would.  Mortgage Bonds could use a boost of confidence right now and word from the Fed would help right now.

 

PS – breaking news…it was just announced that the FHA will allow the $8,000 first time home buyer credit to be applied directly towards home purchase closing costs.  This is hot off the press and the details are yet to be looked at.  We are sure you will be hearing more about this in the following weeks.

 

 

Source:

Michael Delzer
First Class Financial Services
(720) 904-9048, www.fcfsdenver.com
Home Mortgages with Honesty, Integrity, Service & Trust