Rates for fixed mortgages escalate
Friday, July 31, 2009

Fixed rate mortgages in US escalated and were recorded at an all time high since November 2008. This stalls the Fed’s plan to reduce cost of borrowing. The 30 year rate escalated from 5.29% to 5.59% a week ago. As far as rates for 15 year mortgages are concerned, they were 5.06%.

The increasing rate is the last thing that consumers wanted and this could make the housing market even more sluggish. It will reduce the number of people opting for refinancing or buying a new house. This is evident from the reduction in the number of mortgage applications that was lowest ever since February. Not only this, value of shares of reputed homebuilders has nosedived drastically as lenders anticipate that if home loan payments become expensive, it will turn away several prospective home buyers.

Due to rising rates, sale of homes will subside and so will refinancing. It will have a negative impact on consumer spending, making it more sluggish. The Federal Reserve had announced that it would buy mortgage backed securities from Freddie Mac and Fannie Mae that was worth USD$1.25 trillion. This program helped in pushing rates to as low as 4.78% in April.

Rising rates and drop in home prices are simultaneous. And this is what has been happening. Number of foreclosures are also increasing manifold. Market analysts are of the opinion that foreclosure filings in US exceeded the 300,000 for 3 months in a row in May and it is being expected that it may reach the 1.8 million mark during the first half of the current year.

Interesting facts about mortgage market in United States
• As many as 321,480 property owners received an auction notice or a default notice last month. Many had to lose their homes too. The number of repossessed property or defaulters was 18% more as compared to last year.

• Since March 2008, the S&P/Case-Shiller home-price index dropped by 18.7%.

• Due to increase in defaults, 20 major metropolitan areas witnessed a drop in home prices

• The week that ended June 5, the number of applications for mortgage refinancing or buying a home dropped by 7.2%. This information was provided by the Mortgage Bankers Association.

Posted byAdmin at 3:39 AM 0 comments  

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Economists Divided on Direction of Economy, Inflation
Friday, July 11, 2008

With the second half of the year just beginning, economists are questioning if the worst of the U.S. downturn is already over, or whether uncertainty about rising prices spells more gloom and doom for the economy.

Thursday's BLS nonfarm payrolls report for June showed the sixth month of consecutive declines in the U.S. economy, totalling 438k net losses this year and indicating further deterioration is to come. However, economists say it is not job losses that are the major concern heading into the third quarter, but rising prices.

While there is pressure for the Fed to combat inflation, the central bank remains constrained not only by broad-based, anemic growth, but by the fact that soaring energy prices are caused by increased global demand rather than by U.S. consumers.


Charmaine Buskas, senior economics strategist at TD Securities, said the first half of 2008 "didn't see as much fallout as we would have expected," noting that the downswing in jobs was much weaker than in previous downturns. She noted job losses have yet to exceed 88k per month, whereas previous downturns have reported monthly declines of more than 100k and even as many as 200k, which "suggests recent deterioration has been tame."
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The Week Ahead
Thursday, July 10, 2008

This week will begin with a number of Federal Reserve speakers and see the release of housing data in both Canada and the U.S. on Wednesday. The relatively quiet week will culminate on Friday with Canada's employment report for June, which is expected to be a key market focus.

Whereas June's change in employment is anticipated to increase by 10k, following a previous increase of 8.4k, the unemployment rate is expected to hold steady at 6.1%.

Economists from Scotia Capital, however, are calling for an increase in the unemployment rate as well. "The impression that Canada's labour market is holding up better than in the U.S. is generally true. As markets look forward to next Friday's Canadian jobs report for June, however, it would be a mistake to ignore emerging pitfalls," they wrote in a research note to clients.


"Canada's buoyant housing market will continue to support construction employment, while public sector employment is expected to gain once again. Nonetheless, this will likely only lead to a gain of around 5,000 workers. As a result, we are expecting the unemployment rate to move up slightly to 6.2% in June."

In the U.S., meanwhile, June's University of Michigan consumer sentiment index is scheduled to be released. Economists are forecasting a preliminary reading of 55.5, down from May's 56.4.
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