Current Interest Rates – Week of 6/11/12

What happened with interest rates last week?

Opportunities come and go, particularly when it comes to interest rates.  Over the last week, we saw interest rates trend slightly higher from their historic lows as stocks gained some momentum and glimmers of sunshine and rainbows started to come out of the European crisis.  On the home front, the Fed members continue to straddle the fence when deciding whether further “easing” is needed to boost the economy.

In other market news, the European Central Bank decided not to cut rates, surprising the markets and helping stocks to break out of their slump with the S&P 500 bouncing above it’s 200 day moving average.  While the stock rally likely won’t last long, keep in mind that any good news for stocks will typically come at the expense of mortgage backed securities/interest rates.  Interested in learning more, check out  What impacts interest rates?

 

What’s coming up this week on the economic calendar and what’s the impact on interest rates?

Over the weekend, Spain announced a $125 billion bailout of its banking system.  The bailout is intended to recapitalize the Spanish banks and keep the European Union from continuing a further downward spiral, but the euphoria surrounding the announcement has been short lived.  Investors are fleeing from Spanish government bonds causing their yields to spike higher.  Our U.S. bonds have received some boost, but will be following cues from the global markets as the week continues.

The economic reports due this week will deliver measures of inflation in our Core CPI and Core PPI.  These inflation numbers indicate the rise in the cost of goods/services after excluding food and energy costs.  While the Fed has yet to voice their concerns over inflation, it’s inevitable.  We will be watching these reports closely as any talk/hints of a rise in inflation will immediately trigger a rise in interest rates.

 

Here’s our strategy for the days and weeks ahead…

With interest rates still near historic lows, we continue to advise our clients to lock in their interest rates when the opportunity presents itself, particularly if the transaction is closing in the next 30 days.  Home purchase activity and low refinance rates have led to a large increase in loan volume across the nation.  These new mortgage loans add to the supply of mortgage backed securities causing their price to drop and our interest rates to go up.

Next Wed. 6/20, the Fed will hold a meeting to discuss, among other things, whether or not there is need for further quantitative easing.  The last few announcements of “easing” caused interest rates to go up at a rapid rate.  It will be very important to have a strategy to lock in your interest rate leading up to this event.

We maintain an ongoing dialogue with our clients about the market and interest rates throughout their financing experience so we can take advantage of the lowest rates when they present themselves.  We all want the lowest rate, and the best way to ensure that you get the lowest rate, is to build a relationship with your mortgage planner, so they can best advise you on when to lock in your rate.  Call us today for a complimentary mortgage review or Apply Online.