Moorings Column 10-01-12

Hello and welcome to this week’s edition of Moorings, your source where local and national mortgage and real estate news meet. As we do each week, let’s first take a look at interest rates and any movement from last week. Currently, a client who is looking to purchase or refinance a home with a conventional thirty year fixed rate mortgage can expect an interest rate of 3.5%. A client looking at an FHA loan of up to 96.5% loan-to-value ratio can expect a rate of 3.25%.  Once again, these are truly some of the lowest mortgage rates I have ever seen in the business and will likely be the lowest we ever see, and now is a great time to buy or refinance a home!


In major economic news, last week the final reading of GDP for the second quarter was reported at an anemic 1.3%. This was after a sizable downward revision to previous estimates and this is significant because GDP is the broadest measure of economic activity. In addition, Durable Goods Orders (i.e. orders for products like furniture and computers that are designed to last for an extended period of time) came in shockingly low. Figures like these speak to the improvement needed in our economy, and are a big reason why the Fed announced its latest round of Bond buying (known as Quantitative Easing or QE3) on September 13.


There was some surprisingly good news last week, as Initial Jobless Claims came in at 359,000, much better than expected and the best reading since late July. One of the main objectives of QE3 is to promote job growth, which is essential for our economy to grow. Time will tell if QE3 and this money injection into the economy will spark economic growth and lower unemployment or if it will devalue the U.S. Dollar, raise commodity and asset prices like Stocks, and heighten inflation fears. On the flip side of that, negative economic news like the GDP Report and Durable Goods Orders often causes investors to move their money out of risky investments like Stocks and into safer investments like Bonds, including Mortgage Bonds (which home loan rates are based on). ). That’s why home loan rates often improve when our economy is struggling. In addition, investors also tend to move their money into safe investments like our Bonds during times of global uncertainty, such as last week’s strikes in Greece and riots in Spain. These two factors and the Feds QE3 Mortgage Bond purchases are the main reasons that Bonds and home loan rates have improved of late. Well that’s all for this week and until next week, Be Blessed and Numbers 6:24-26 be on you.