Ever wonder why everyone’s saying that interest rates are at historic lows?

Mentioning that rates are at “historic lows” means exactly that: rates are at one of their lowest points, ever, for as long as interest rates have existed in the United States.

Check-out this graphical history of the Prime Rate.

But keep in mind: even though people are correct to say that rates are at “historic lows,” it’s important to know that an individual’s interest rate is determined by lending guidelines set by banks. These guidelines are determined by evaluating credit scores, employment history, salary and assets.

Here’s a recent PERL Podcast on interest rates.

If you’re currently gathering information about the in’s and out’s of financing, listen to more PERL Podcasts to better educate yourself about the home buying process.

And for a qualified up-to-the-minute interest rate estimate, contact your Mortgage Consultant.

Market Comment
Mortgage bond prices fell last week applying upward pressure on mortgage interest rates. The bond market got a shock from a surprise increase in new home sales, a stronger than expected durable goods orders, and some stock strength. Fortunately the Fed continued to buy mortgage backed securities in an effort to keep interest rates relatively steady and low.

For the week, interest rates on government and conventional loans rose by about 1/8 to 1/4 of a discount point.

The employment report Friday will be the most important economic release this week.

Consumer Confidence
The Conference Board releases the Consumer Confidence Index on the last Tuesday of every month. The report details the levels of confidence that individual households have in the performance of the economy. The data is derived from a survey of 5,000 households nationwide. The survey polls consumer opinions on current business conditions, their jobs, their incomes, and their future spending plans.

The consumer confidence index is significant in that it provides a precursor into consumers’ willingness to spend in the months ahead. However, many analysts point out that willingness to spend does not always convert to actual expenditures.

Despite economic uncertainty, liquidity issues, and housing market weakness, American consumers continue to spend. However, many analysts question whether consumers can continue to buoy the economy, especially amid rising unemployment and tightening credit.
This week’s release will be eagerly anticipated. Signs of weak consumer confidence could lead to improvements in mortgage interest rates. However, stronger than expected figures could spike rates higher.

With mortgage interest rates relatively low, capitalizing on current levels is recommended. Mortgage interest rates tend to trend lower slowly, while increases tend to occur quickly. A cautious approach is necessary to protect from future market fluctuation.

As everyone knows, the national mortgage market is changing quite rapidly – more this past year than in the past decade.

Last week, the Federal Reserve recently announced a plan to augment its balance sheet by pumping another $750 billion into purchasing more mortgage-backed securities, the bonds that directly dictate 30-year and 15-year fixed rate government and conventional mortgage interest rates.

This is in addition to $500 billion currently being used between January and June to drive interest rates down and help stimulate the economy. The Fed also announced the purchase of $200 billion in additional agency debt, and an increase in long-term Treasury bond purchases of $300 billion to boost improvements in private credit markets.

This announcement had a tremendous impact on the mortgage business: interest rates dropped by .5% overnight, creating an immediate influx of interest for clients looking to refinance loans.

The Federal Government is hoping that financiers will buy investments that the Government is backing with cash.  And because the government is providing the financing that allows this section of the market to work, it’s our hope that potential homebuyers (who are currently “on the fence”) will jump in and take advantage of this unprecedented development, as the Fed works to engineer buzz and confidence in the American housing market.