Fed Holds Rates
June 25th, 2008 by Harvey ShapiroAt the end of its two-day meeting today, the US Federal Reserve governors announced that there would be no change in interest rates. So, the federal funds rate will remain at 2.0%.
The Fed sees inflationary risks for the economy and will probably start increasing rates as soon as their next meeting in August.
This means that there should be no change in mortgage rates in the near term.
June 26th, 2008 at 10:37 pm
mortage interest rates were rising steadying over the last few weeks, even as the feds have been moving their key rate down since september. the 10-year treasury note is at, i believe, 4.06%. it was at 4.10% last week. there should be a slight drop in mortgage rates in the next couple days though nothing sigificant. i don’t think there will be a treasruy note buying frenzy with yields at only 4.06% and inflation at 4%. at maturity, it’s just about break even without any propection against inflation. but with the stock market losing 350 pts today, no telling where investors will run. governemnt bonds seem like a good idea so, maybe the yields will drop as they move opposite their price. in a nut shell, interest rates will perhaps drop a little in the coming days.
the big picture… the fed funds rate at 2% will probably go up later this year, maybe as soon as august depending on inflation and how much it will grow over the next few months. this is the big question mark. i think inflation will definitely rise sharply as oil prices are expected to hit $150 by summer. so depending on the rate of inflation and the feds deciding to raise rates in response, the key rate is expected to move +.25% by years end. i think this will deflate any possible rebound the mortgage and credits markets are trying to make. that’s not good for us here in hawaii. with higher home prices than most mainland markets, strict lending, and a modest income growth (1%), people will have a hard time affording to buy. sellers will have no choice but to price correctly (under the last comp sold) or run the risk of not selling. thus prices will start to fall sharper now than they did over the last three years. the honolulu board of realtors report that is due as public record in about 5 days, will show oahu single family median prices drop 5.5%-6.5% from june last year. sales dropping about 35%-40%. this would be the start of a steep rundown in prices over the next couple years.
July 2nd, 2008 at 6:19 pm
It would be nice if the 30yr rates got down in the mid 5’s again. A lot of people would be able to refi and or invest $$. That would do a lot to help this current housing situation.