This morning Kim Neilson our Executive Vice President at McCue Mortgage sent out an e-mail to all our Loan Originators explaining why we have been experiencing an increase in the mortgage interest rates over the last week. For those of you who have not heard, last Wednesday the mortgage rate increased significantly, and have continued to slightly increase since then.

In her e-mail Kim announced that the mortgage market had opened down again today because of news that Job loss claims came in @ 345,000 versus the prediction of 520,000.  She also stated that even though unemployment rate is at a 26-year high of 9.4%, many economists are hopeful that January's job losses were the peak since the last 3 months have shown signs of improvement for jobless claims.

Another interesting fact that she pointed out was that "consumer confidence rose again in May and represented the largest two-month rally since records began to be kept in 1967. Single-family existing home sales rose 2.5 percent in April; inventories of homes for sale also rose to 9.6 months from 9.0 in March,According to the National Association of Realtors."  All of this data points to economic recovery.

The Fed has been trying to keep rates on real estate loans down by purchasing mortgage backed securities. Last week on Tuesday & Wednesday the Fed once again bought more securities, however, investors were disappointed because they expected the Fed to purchase more than they did.  Once that news came out investors took matters into their own hands and sold mortgage backed securities, causing mortgage rates to increase. A big concern right now is that the federal budget deficit is indicating that inflation may just be around the corner and investors will demand higher interest rates to compensate for additional risk.

Kim also stated that the news is that FED will continue to purchase mortgage backed securities but have not committed to controlling rates, and that we should expect to continue to see volatility for a while longer similar to what we saw in October & November of last year.

Even in the mist of all this doom and gloom, we need to keep everything in its proper perspective.  Rates continue to be low even they have been increasing recently.  And housing affordability is reaching record levels with nearly 73 percent of all homes sold in the first three months of 2009 considered affordable. That is the "highest percentage ever reported by the 18-year-old, quarterly Housing Opportunity Index, compiled by the National Association of Home builders."

What does all this mean in a nut shell.  It says to me that Buyers should BUY NOW while interest rates and home prices are still low.  That is as short and simple as I can interpret all of the information above.  BUY NOW!!

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com