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Mortgage Market Update

Mortgage Market Update- January 6, 2013

If you are one of the thousands of people who are sick of hearing the words “fiscal cliff” the last minute deal reached by Congress and the White House is a relief. However, the end of fiscal cliff negotiations does not necessarily mean the end of the financial discussions that are going on in Washington.

Over the next few months, we can expect to hear about the “new” sequester which is a result of kicking the can down the road as well as the scary debate about paying our bills. These factors will continue to have an impact on the mortgage market, but there was some other news this week that may cause the mortgage market to sit up and take notice.

FOMC notes do not bode well

Fed Chairman Ben Bernake has been a proponent of the purchases of new Mortgage Backed Securities (MBS) which has helped keep mortgage rates as historically low levels. There has been a great deal of talk about Mr. Bernake resigning his post as Fed Chairman. Unfortunately, this could be bad news for the mortgage market, primarily because it may signal a quicker end to this practice. The FOMC notes indicate that while Bernake is a big fan of this type of program, there is very little support in other areas of the Fed committee.

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Ironically enough while the fiscal cliff deal is good for the overall economy, it wasn’t so good for bonds. Keep in mind that when this type of news gets out, the stock market does better overall meaning the bond market takes a bit of a hit. While it’s true that a more stable economy is good for the housing market, it’s not so good for bond prices: Simply put, what’s good for stocks is bad for bonds.

The job market report

The job market report earlier this week reported that the unemployment rate stayed the same. However, there were some signals in this report that show signs of a much stronger job market. Two indicators of an improving market were higher manufacturing sector jobs and higher construction jobs meaning the housing market may be improving.  Overall, nearly 2 million jobs were created in 2012 which is positive news for many.

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During November, new home sales reached a two-and-a-half year high. In addition, sales previously owned homes reached their highest level in three years.  While some analysts feel that interest rates will continue at record lows, there is a general consensus that rates will not likely drop any lower.

The current news resulted in a slight increase in rates during this past week. There was no dramatic increase in rates, in fact, rates actually climbed to a four-month high. This is not however cause for panic since most rates are still well-below 5 percent. If you are considering refinancing or buying a home, take advantage of these rates. Keep in mind that as more “good news” comes in, the higher rates will go.  The Eurozone is on the verge of reaching an agreement on Spain and Greece, housing starts are continuing an upward trend and the overall economy shows signs of improvement. If you have any questions regarding mortgage programs and wish to take advantage of these lower rates, contact Core Mortgage Financial today and let us help you secure the mortgage you want while rates remain low.

Disclaimer: Mortgage Market update is for December 31, 2012-January 3, 2013. This article is for informational purposes only. The mortgage market update should not be used for rate lock guidance.

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