Good Afternoon Everyone!
As we suggested earlier in the week, customers should have locked their interest rates. Those customers who locked their loans have saved themselves tens of thousands of dollars in interest over the term of their loans. Today, the price of mortgage bonds continues to decrease and this decrease translates into rate increases.
Initial Jobless Claims were reported at 293,000, lower than expectations, and actually the lowest level reported since early January. And the more closely watched four-week moving average of Claims fell to their lowest level in a year. This report shows continued signs of a tightening labor market and should this recent strong trend continue, it could re-ignite wage based inflation fears. Why? In a tight labor market, it is more difficult to find employees, and businesses may need to pay more money to keep their current employees and more money to attract new ones. This means that as wages rise, the amount of disposable income increases - which gives consumers the ability to buy more goods and services - and that can be inflationary. Additionally, the cost of higher wages paid to workers could be passed on to the consumer by raising prices. Why do we care? Because inflation in any form is bad news for Bonds, and therefore our rate sheets as well.
Fed Chairman Ben Bernanke spoke at a Chicago banking conference this morning on sub-prime lending and banking regulations. There were no real surprises from his comments regarding the reasons for the sub-prime situation. It was interesting to hear how much in alignment Bernanke's comments were with our own take on the subprime issue. What is becoming even more clear while listening to Mr. Bernanke is the need for financially literate mortgage planners to help guide the consumer through the loan process. In a recent poll, over 30% of homeowner's never knew that their mortgage was an Adjustable Rate Mortgage. Many of those folks will not be able to afford the mortgage payment once their ARM adjusts. I can't say this enough.....it's not always about rate. This is a very good example of clients being steered wrong and it's my job to make sure the customer knows exactly what they are getting into.
Make it a GREAT day!
Comments(0)