Home Loan Rates Reach for Record Bests

Last Week in Review: Bonds and home loan rates continue to reach for record best levels. Will this trend continue?

Forecast for the Week: After last week’s light economic report calendar, look for several key reports on inflation, retails sales, consumer sentiment and more.

View: There’s been another high-profile hack of major websites. Be sure to share important safety information with your clients, referral partners, and colleagues.

Last Week in Review

"Gonna keep on tryin’ till I reach the highest ground." Stevie Wonder. And US Bonds (including Mortgage Bonds, to which home loan rates are tied) are continuing to reach for the “highest ground” or best levels ever. Read on for details. Last week, Fed Chairman Ben Bernanke was mum about another round of Quantitative Easing (QE3). This put a pause on the Stock rally we saw midweek, to the benefit of the Bond Markets and home loan rates. Also helping Bonds and hurting Stocks was a threat by Credit Rating firm Fitch, who said that the US may lose its AAA rating next year unless Congress comes up with a credible plan to significantly cut the budget deficit. And Fitch didn’t stop there. They downgraded Spain three notches to BBB, which is just two notches above junk status! The lack of confirmation of QE3, the US debt downgrade threat, and the escalating drama in Europe caused a "risk-off" trade or flight to safety into the US Dollar. This means US Bonds are being purchased as a safe place to "park" money, and this is helping Bonds and home loan rates reach for their best levels. And while that’s great news for homebuyers, it is also important for our economy to strengthen and improve. Last week’s economic report calendar was light, though we did see a glimmer of good news as the latest weekly Initial Jobless Claims Report showed its first decline since April. The bottom line is that now continues to be a great time to purchase or refinance a home, as home loan rates are reaching for historic lows. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week

Economic data heats up this week…and the news may impact Bonds and home loan rates. Here’s a glance at some important reports to watch: The economic calendar gets interesting on Wednesday when the Retail Sales Report for May is released. The data will give investors a look at how consumer spending is holding up in this choppy economy. Also on Wednesday, Wall Street will get a look at inflation at the wholesale level with the Producer Price Index (PPI). On Thursday, the more closely watched Consumer Price Index (CPI) will be released. If there is any hint of inflation pressures, Bonds and home loan rates could worsen, especially since prices are already near record bests. Weekly Initial Jobless Claims will also be delivered on Thursday. To round out the week, Empire Manufacturing and Consumer Sentiment will be released on Friday. In addition to those reports, the U.S. Treasury is set to sell $66 billion in notes and Bonds. Bond prices — and as a result, home loan rates — may be impacted according to the demand the auctions see. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on. When you see these Bond prices moving higher, it means home loan rates are improving — and when they are moving lower, home loan rates are getting worse. To go one step further — a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning. As you can see in the chart below, Bonds and home loan rates continue to reach for their best levels ever. I’ll continue to monitor this closely. Chart: Fannie Mae 3.5% Mortgage Bond (Friday Jun 08, 2012)

The Mortgage Market Guide View..

Stolen LinkedIn Passwords are Only Half the Problem Last week, a high-profile hack resulted in millions of people worrying about the security of their accounts on sites such as LinkedIn, eHarmony, and the BBC. In response to the situation, LinkedIn deactivated the stolen passwords and sent emails to the owners of those accounts with information on resetting their passwords. By the end of the week, LinkedIn had not been able to identify any actual account break-ins due to the compromised passwords. But the stolen passwords were just the first problem! Watch Out for a Second Scam Soon after the highly publicized hacking, a second attack wave was unleashed on unsuspecting LinkedIn members. The second wave came in the form of a phishing scam. This scam consisted of phony emails that look as if they were sent from LinkedIn. The phony emails include a link that directs users to a phony website that looks like it will reset the LinkedIn password. And, you guessed it, once users put their information into the website, they’re vulnerable all over again! Don’t Click That Link! LinkedIn has confirmed that it is sending emails to members whose passwords were compromised, but the company stresses that those emails do NOT include any links. Instead, the company has included specific instructions that need to be followed to reset the password. So if you see an email that looks like it will help you reset your password, don’t bite. Stay Up to Date As part of its communication to members, LinkedIn posted some important reminders about best practices for protecting passwords from phishing scams and other malicious scams. You can read the password best practices on LinkedIn’s blog and follow LinkedIn’s Twitter feed to stay informed on the latest developments of the hack.

Leonard Winslow
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Leonard Winslow Branch Manager/ Loan Officer at New American Mortgage Business Administration, Bridgewater College Charlottesville's Loan Expert

Rob Alley, Realtor/Owner of Virginia Real Estate Solutions at RE/MAX Assured Properties
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roballeyrealtor@gmail.com
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Author Bio: Rob Alley earned a bachelors degree at Virginia Tech, in Blacksburg, VA in Biology. Rob Alley consults with homeowners regarding Real Estate transactions and speciliazes in listing and selling CHarlottesville Real Estate.

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