Interest Rate Update

Remember quantitative easing? Quantitative easing is a program in which the Federal Reserve buys government treasury bonds to stimulate the economy. By injecting cash into the economy, the Fed hoped to keep credit available and interest rates low.  In total, the Fed ended up transferring $76.9 billion to the US Treasury in 2011, which is the second highest total ever (behind the 2010 total of $79.3 billion).

JPMorgan posted a record profit of 19 billion in 2011, but also spent $3.2 billion during the same time fighting lawsuits, most of which were over poorly written mortgages. As a result of legal costs, JPMorgan’s 4^th quarter fell 23 percent from a year earlier, and bank stocks dropped as a result.

Retail sales rose 0.1 percent in December to a seasonally adjusted $400.6 billion. November also logged gains of $400 billion, due in part to record Black Friday weekend profits. It was the first ever time sales had reached the $400 billion mark in back-to-back months.

Last week, applications for unemployment benefits increased 24,000 to a total of 399,000.  The increase was largely due to companies reducing their work forces after the holiday season and is typical of early January.

Lastly, transcripts of the Federal Reserve meetings in 2006 were released last Thursday, and gave us an insight into the mindset of its officials prior to the housing collapse. What was the attitude like in the meeting room at that time? Largely unconcerned. The New York Times reported that officials joked about the antics home builders used to lure buyers, and emphasized that the fundamentals of the economy were strong.

By the end of last week, the national average of the 30 year fixed fell to 3.88 percent (3.94 percent APR) and the 15 year fell to 3.22 percent (3.37 percent APR). Central Coast Lending offers a 30 year rate as low as 3.5 percent (3.582 percent APR) and a 15 year rate as low as 3.0 percent (3.203 percent APR).  Interest rates continue to inch slightly lower, and conditions remain extremely favorable for refinance.