Good Bye Rates

The unemployment number this a.m. was the nail in the coffin for the low mortgage rates that we have been enjoying for the last year. Although I'm convinced that the Fed can't move aggressively in raising short term rates- no matter what the economy does, this doesn't stop Wall Street from selling bonds and driving up long term rates. My opinion (again, if I knew for sure, I'ld be on my yacht in the South Pacific) is that the Federal Reserve is caught between a rock and a hard place. Greenspan said as much yesterday when he said the biggest threat to the economy was the Federal Budget deficit. If the Fed raises interest rates to slow inflation, then the higher borrowing costs will further drive up the deficit, as well as dry up capital for the private sector. More borrowing by the government leaves less money for business.

Nevertheless, the economy is showing robust growth across most sectors and that is bad for bonds. So, goodbye rates.

Currently 30 year fixed mortgage rates for conforming loans are in the mid-6% range for 0 points. Read this month's newsletter for further information.

Posted by bruce at May 7, 2004 08:40 AM | TrackBack