Events This Week:

Inflation Lower

Jobless Claims Fell

Housing Starts Down

Manufacturing Mixed

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Events Next Week:

Tues 12/23
GDP
Existing Sales
New Home Sales

Wed 12/24
Durable Orders
Income

Fed Statement Propels Mortgage Rates To Historic Lows

Thanks largely to Tuesday's Federal Reserve statement, the historic drop in mortgage rates over the last few weeks continued a little further this week. Lower than expected inflation data from the November Consumer Price Index (CPI) report also was favorable for mortgage rates.
According to Freddie Mac's weekly survey, average 30-year fixed conforming mortgage rates fell to the lowest level in 37 years. Mortgage rates turned slightly higher late in the week, however, raising the question of whether the downward trend will continue.

In a unanimous vote, the Fed cut the target Fed Funds rate from 1.00% to a range between 0.00% and 0.25%. The 75 basis point cut was larger than the consensus forecast for a 50 basis point cut. According to the statement, the Fed will employ "all available tools" to stimulate economic growth. Most notable for the mortgage industry, the Fed mentioned the option of expanding the purchase of large quantities of mortgage-backed securities. Mortgage rates generally move based on changing levels of demand for mortgage investments. Immediately following the release of the statement, mortgage rates dropped due to this expected increase in demand.

In the housing sector, November Housing Starts fell -19% to a record low. Building Permits, a leading indicator, showed a similar decline.
The slowdown in the building of new homes will help reduce the inventory of unsold homes on the market.

Also Notable:

* The auto industry will receive emergency loans from the
government
* The November CPI report showed a record monthly decline in
inflation
* 3-month Libor rates fell to 1.5% from a recent peak near 5.0%
* Oil prices fell below $35 per barrel, the lowest level in almost
5 years

This Week’s Base Rates from Hawaii’s Top Lenders

What’s the most important item to take from this graph? Not all lenders react to the bond market equally. While some lenders dropped their rates, others were hiking theirs. Our company brokers loans to all the major national lenders and all four local banks. With a depth of lenders to compare, we always find the best rates available for our clients.

With rates below 5.000% existing home owners can benefit from a refinance to lower their payment. Those looking to purchase will now be able to purchase more home for the same monthly payment. With rates at a 40-year low, call me to find out how today’s rates will impact your specific situation.

Average 30 yr fixed rate:

Last week:

-0.32%

This week:

-0.27%

Stocks (weekly):

Dow:

8,579.11

-50.57

NASDAQ:

1,5764.32

+23.60

Week Ahead

During Christmas week, all of the economic data will come out on Tuesday and Wednesday. The final revisions to third quarter Gross Domestic Product (GDP) will be revealed on Tuesday. GDP is the broadest measure of economic activity. Both Existing Home Sales and New Home Sales will be released on Tuesday as well. Durable Orders, another important indicator of economic activity, is scheduled for Wednesday, along with Personal Income. Consumer Sentiment and Jobless Claims will also come out before Christmas. Mortgage markets will close early on Wednesday and Friday, and will be closed on Thursday.