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Rate Update

Mortgage interest rates continued to move higher last week as generally positive economic data outweighed statements from the Fed. The Federal Open Market Committee met for the final time in 2010 and, as expected, made no change to the benchmark lending rate. They confirmed that the economic recovery is continuing, although progress has been “disappointingly slow”. Household spending is increasing, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending is rising less rapidly that earlier in the year, employers remain reluctant to add to payrolls, and the housing sector continues to be depressed. Despite this gloomy statement, both the Dow and S&P 500 are trading at their highest levels since September 2008 thanks to strong economic data. Retail Sales jumped 0.8% in November, the fifth straight monthly gain, the Consumer Price Index was up only 0.1%, Industrial Production increased 0.4%, and Initial Jobless Claims fell for the sixth straight week to the lowest level since August 2008. Many economists believe rates have gotten ahead of themselves. There is little inflation, unemployment persists, the housing market is still stumbling, and although the deficit is a huge long-term problem, the economy is not breaking any records in the short-term. Currently, the 30 Year Fixed is 4.500% (4.634% APR) and the 15 Year Fixed is 3.750% (3.963% APR). News this week will feature New and Existing Home Sales and Durable Goods Orders.

Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile