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Rate Update

Mortgage rates maintained their record low levels last week, as uncertainty of the pace of the economic recovery has caused investors to seek the relative safety of government guaranteed mortgage-backed securities (MBS). In his semi-annual testimony to Congress, Federal Reserve Chairman Ben Bernanke described the US economic outlook as “unusually uncertain”. According to Bernanke, this is the worst labor market since the Great Depression, and is recovering more slowly than expected. Bernanke expressed reluctance to provide further stimulus, suggesting that the upside of additional Fed actions would be limited, while the downside would raise future inflation expectations. Uncertain economic growth with low inflation is a favorable environment for mortgage rates. Housing sector data contributed to the feeling of uncertainty. Existing Home Sales fell 5.1% in June, much better than expected, while the median home price increased 1% from one year ago. Housing Starts fell 5% from May to the lowest level since October 2009, and Building Permits for single-family housing, the biggest part of the market, dropped 3.4%, the lowest since April 2009. Today, we learned that New Home Sales increased 24% in June, but still the second-lowest annual pace going back to 1963. Currently, the 30-Year Fixed is at 4.125% (4.273% APR) and the 15-Year Fixed is at 3.750% (4.012% APR).

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