Rate Watch - Freddie Mac reported on Dec. 14 that 30-year fixed-rate mortgages averaged 6.12%, up from 6.11% two weeks back. 15-year loan rates increased from 5.86% from 5.84%. With mortgage rates remaining near their lowest levels, exotic mortgage borrowers are now jumping into the safety of fixed-rate loans.
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As expected, the Federal Reserve decided to keep short-term interest rates steady at 5.25% for the fourth consecutive time in a 9-1 decision. The lone dissenting member, the President of the Federal Reserve Bank of Richmond Jeffrey M. Lacker, voted for a rate hike. The Fed's statement following the last meeting in October, 2006 was almost the same: economic growth is slowing, and the risks of inflation remain, although the risks are expected to moderate over time. The only change form the October statement is emphasizing the "substantial cooling of the housing market."
From the Federal Reserve: The last time the Fed began a series of rate cuts designed to stimulate a slowing economy was on 1/03/01 or nearly 6 years ago. During the course of calendar year 2001, the Fed dropped short-term rates 11 times, including 2 rate reductions in January alone. Before its first rate cut, the Fed had last raised rates in mid-May 2000 or 7.5 months earlier. (A repeat of this scenario would certainly be a help!)
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A borrower recently asked us how to estimate property taxes for a new purchase. The Assessor's Office in Ann Arbor stated that they base SEVs on a two-year rolling average, and that the data they use is one-year old. So right now they are using a two-year rolling average with data from 2004/2005. They encourage people to use the appeals board to make their case.
How Long Does it Take to Pay Off a Credit Card? The answer may surprise you! The following chart shows how much interest is charged, and how many months it takes to pay off a credit card balance by just making the minimum payment each month. Keep in mind that this illustration assumes that no additional purchases are made with the card.
$500 Balance
•· 14% interest rate = 43 month payoff / $136.91 total interest paid
•· 17% interest rate = 46 month payoff / $181.49 total interest paid
•· 19.8% interest rate = 49 month payoff / $231.90 total interest paid
$1,000 Balance
•· 14% interest rate = 80 month payoff / $455.04 total interest paid
•· 17% interest rate = 89 month payoff / $626.80 total interest paid
•· 19.8% interest rate = 100 month payoff / $843.05 total interest paid
$3,000 Balance
•· 14% interest rate = 140 months / $1,727.89 total interest paid
•· 17% interest rate = 158 months / $2,418.29 total interest paid
•· 19.8% interest rate = 181 months / $3,287.43 total interest paid
Four, eight and fifteen years to pay off consumer debt. Who says that credit cards offer short-term financing? And look at the total interest paid, in some instances more than the original debt. In addition, there are many cards that charge even higher interest rates than what are illustrated here - imagine how long it takes to pay those balances off!
We wish you all a safe and happy holiday season!
Disclaimer: The information contained in this newsletter has been gleaned from various sources and is intended to be current and accurate, however we cannot and do not warrant or guarantee as such. This newsletter is for informational purposes only and is not intended to be, nor should it be considered as, investment advice. It does not take into consideration the financial circumstances, needs or investment objectives of any specific person who may receive this newsletter. Individuals should seek financial advice with regard to their specific circumstances before making any investment decision.
©Copyright 2006 Ann Arbor Mortgage Company, LLC
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