On June 17, Greece held elections that would determine its future with the Euro zone. The pro-bailout, pro-austerity parties won a slim majority, prompting many investors to sigh with relief. However, the threat of economic “contagion” stemming from European debt is still high, as debt burdened countries Spain and Italy struggle forward with no lasting solution in sight.
Markets have recovered slightly from large drops at the beginning of the month on speculation that Bernanke and the Federal Open Market Committee could commit to further stimulous measures to pick up a flagging U.S. economy burdened by poor employment and concerns about Europe. The FOMC meetings take place on June 19 and 20 – follow our website for daily updates.
Interest rates dropped again this week. Jason Grote, Central Coast Lending owner, believes that rates should be lower, and will continue to feel downward pressure due to the 10-year U.S. Treasury bond yield. Historically, the 30-year fixed rate has held consistently 1.50 percent higher than the 10-year bond yield. Currently, the 10-year bond has hovered around 1.60 percent, which would place the 30-year around 3.10 percent.
We are pricing the 30-year fixed lower this week – at 3.375 percent (3.415 percent APR), which is a drop from last week, but still not as low as we might like to see. The 15-year fixed APR dropped again, and we now place it at 2.750 percent (2.860 percent APR).
Lastly, we just want to say – make sure you follow along with the budget cuts and tax code reform debate. We have seen suggestions out there that one “loophole” that could be closed (to pay for a lower tax rate) could be the Mortgage Interest tax deduction. While we think this is extremely unlikely, it is important to not take anything for granted.