Future Fed Hikes - Pain In The ARM

Fed Chairman Alan Greenspan spoke regarding future Fed rate hikes.



With all the worry over just how aggresively the Fed will hike rates it seems likely that there will be a stall in the treasury market causing mortgage rates to rise before the impending Fed hike that could take place any day now. That said it seems likely that rates will surge at significantly high levels in the days and/or weeks to come.



What will the outcome be? A Major pain in the ARM(Adjustable Rate Mortgage.) ARM Borrowers will feel the impact of the hike more so than fixed rate borrowers.



One senior economist says Americans are carrying a lot of debt and much more of it will be exposed when rates rises. 50 percent of new mortgages outstanding were Adjustable Rate Mortgages. As a result almost one quarter of total household debt would be affected instantly by higher rates, more than 70 percent higher than the exposure rate seen in 1994.



Rising rates will impact households by reducing buying power and less spending.



Good news for those who opted for fixed rate mortgages.

Six In One Hand Half Dozen In The Other

The long term and short term events impacting mortgage rate levels will be playing against the other.



May's Producer Price Index (PPI), which helps measure inflationary pressures at the producer level of the economy. Analysts expect to see an increase of 0.6% in the overall index. Rising inflation will cause investors to sell bonds, driving prices lower and mortgage rates higher.



If there is poor demand for Treasury sales mortgage rates will move higher shortly after the results are posted. If demand is strong bond prices will rise and mortgage rates will move lower. So where are rates headed based on the present data? In the short term rates may dip slightly but expect rates to rise steadily by weeks end.

Rates to Dip Before The Climb Continues

Trends indicate that rates have been steadily inching up although there have been a number of reversals as rates see sawed only to resume a rather jagged climb upward.



This is to be expected in the weeks and months to come with a little help from the Feds along the way. That said rates are still at very modest levels and ripe for home financing and refinancing.



An increase in unemployment and fewer new jobs than expected would likely create a stock market sell-off, leading to lower mortgage rates. This should create a slight upsurge in real estate financing and refinancing which would put more money into the economy on all levels.



All in all it looks like we may be heading for lower rates before they start climbing steadily again. But climb they will.

Do You Take This Rate ...For Better Or For Worse?

Things are getting a little tense for rate shoppers looking for a good match as mortgage rates inched up today. Stock market weakness and an upward revision in the labor market indicating higer levels of productivity than expected boded well for the bond market but not enough to lower rates.



The Labor Department will post May's Employment data early tomorrow morning. Fridays labor report is expected to be remain steady. An increase in unemployment and fewer new jobs than expected would likely create a stock market sell-off, leading to lower mortgage rates.



For those who made a commitment to low rates at a time when locking in fixed rates was good, life is bliss. Those who hesitated to say "I do" to refinancing are quickly finding out that things just aren't like they used to be. Tommorows Labor report will impact mortgage rates for better or for worse.

Holding Steady Freddie

The yield on the benchmark 10-year note that mortgage lenders use to

set rates fell to its lowest level in weeks. This edged mortgage

rates down from yesterday`s levels, but not enough to change them.

That said rates are holding pretty steady freddie. But we wouldn't call it an actual drop.

Whether rates dive into 5 percent bracket only time will tell. More interestingly would be the impact such a dive would have on the housing and mortgage market.

Home Buying Refinancing See Saw

Over the past several days mortgage rates have been on a see saw.

The likelyhood of mortgage rates heading up hinge on the the following IFs



If the fret over oil prices continues to subside and gas prices follow

If violence in Iraq settles

If shoppers continue snapping up homes and buying summer clothes.

If home sales continue to surg

If job claims decline

If manufactoring picks up

If mortgage rates continue steady

If real estate financing and resultant refinancing remains robust

If money saved from the past three year home loan refinance wave continues to go undepleted...

...if so rates can be expected to continue heading up.



Other Factors causing the see saw effect seen over the past week could bring interest rates down and trigger another refinance wave are little improvement in the Mid-East situation. Little imrovement in oil and gas prices. A significant increase in unemployment levels. An ongoing surge in home sales over the next six months would open the way for potential refinancing.



For now however home refinancing has decreased significantly as rates rise. Interest rates should stabilize and resultant home refinancing and home buying should move to modest levels but steady.

Rates Take A Dip - Hello Down There!

Rates take a dip on the charts indicating that the economy still has work to do getting itself on its feet. Still with rates as low as they are lenders and merchants wonder why loan activity has declined so sharply. It would seem that folks have greater incentive to pour borrowed money into merchant coffers while lowering their interest rates and perhaps saving a bundle on exhorbitant interest rate fees.



The question is how long will rates continue this dip and stall? At present there may be more factors leaning toward a continuation of the present scenerio over the short term. However it must be noted that June is likely to put new factors on the table one being the much loathed but highly expected Fed rate hike.



That said homeowners and buyers who have held out for better rates may see a quickly dimming light at the end of a rather short tunnel.