Wednesday, December 17th, 2008
Good news Lakeshore East!
The snow is falling and so are the rates!
Rates have fallen BELOW 5%. Don’t miss your opportunity to catch a great rate this winter. Call Lakeshore East’s preferred lender, PERL Mortgage, to get rate quotes and program details.
Steve Laner
Executive Vice President
847.282.5030
SteveL@perlmortgage.com
Matt Cochran
Mortgage Advisor
773.413.6210
MCochran@perlmortgage.com
Visit www.perlmortgage.com to stay informed of market conditions. We provide frequent update through our PERL Podcast series and in our blog of current news and articles.
Market Comment
Mortgage interest rates dropped once again, due to last week’s rising mortgage bond prices and an increased demand for 3 and 10-year Treasury bonds. The economic data released was as expected, indicating that the US economy is weakening. For the week, interest rates on government and conventional loans fell by about 3/8 of a discount point. Tuesday’s Federal Open Market Committee meeting will be the most important event of the week. On Monday, look for potential rate volatility as traders position themselves ahead of Tuesday’s meeting.
Fed Meeting
The central bank of the United States, the Federal Reserve, coordinates borrowing and lending activities of federally chartered banks. The principal reason the Federal Reserve was created was to reduce severe financial crises. One way of accomplishing this goal is to control the amount of money that flows through the economy. By manipulating the US money supply, the Fed influences inflation, unemployment, and the level of US economic activity. The Fed has a variety of tools it uses to control the money supply, but its chief policy tool is the manipulation of short-term interest rates.
All eyes will be focused on Tuesday’s Fed meeting. Most analysts predict another rate cut, as the economy continues to struggle. As of late last week, Treasury Bond futures contracts showed a projected increase in price with an 80% chance that there will be a 75 basis point cut.
Keep in mind that a Fed rate cut does not automatically mean an improvement in mortgage interest rates. The Federal Reserve has direct control over the level of short-term interest rates. The Fed’s influence over longer-term interest rates with rate cuts is less certain. However, the unprecedented recent direct purchasing of mortgage bonds is a strong effort to push longer-term rates lower as well.
Remember, rates are historically favorable. While there is a strong possibility rates could improve, there are no guarantees in these uncertain times. As a reminder, just a few months ago analysts overwhelmingly predicted gas prices would continue to rise. Conditions can change quickly.
