Mortgage rates and international news

October 22nd, 2010

In a slow week for economic data there was little news to impact mortgage rates. Most of the housing news concentrated on the latest foreclosure news which may be turning out to be not so much news. Despite a small blip up in mortgage rates they continue to be at historic lows benefiting those using mortgage calculators for refinance mortgage and new home loan calculations. Here is a look at news impacting the mortgage and housing markets this week.

China puts on the brakes

News from across both oceans may have a trickle-over effect to U.S. rate markets. In China economic growth has slowed slightly in the state-controlled economy. Not that Chinese officials seem to mind the slower growth, as they raised the interest rates in China for the first time since 2007 to slow inflation.

It’s no surprise that the Chinese economy has been growing while Western economies have been struggling to pull out of recession. During its growth China has experienced its own housing bubble and growth in inflation. With the increase in rates it appears Chinese officials are wary of an economy being brought down by housing market values growing too rapidly and popping.

England tightens its belt

Across the other ocean, Britain’s new Conservative Prime Minister David Cameron has presented a very challenging budget to the country. Taking the opposite approach that Washington has taken the last few years, Britain is slashing spending, laying off government workers and installing a formula for tax increases. The budget presented has as its primary purpose to balance the British budget by 2015. To do this, for every increase in taxes the British Government will have to cut four times that in spending.

To reduce spending, the government will cut 490,000 public employees. Watching European Union members Spain, Greece and Ireland (among others) teetering on the brink of collapse due to excessive national debt, British officials are looking to slow and reverse their own spending. The intent is to see more private investment and growth to increase jobs and productivity. If successful. rates in Britain may soon rise as well.

Do interest rates in other countries impact the mortgage rates you are using for a refinance calculator? Yes they do as investors seek the best returns for their investment and eventually U.S. rates rise or fall to be competitive for those investment dollars. While the moves in China and Great Britain have no immediate impact on U.S. mortgage rates, if more nations follow suit there will be an impact in the future.

Lukewarm news for housing and labor markets

Statistics released by the Commerce and Labor Departments this week showed some positive, or less negative, news. Housing starts increased in September from August. While the increase was very small, it was the third month in a row that housing starts grew. Following the sharp decline in starts following the April deadline for the homebuyer tax credits, the news appears to show that housing markets may be rebounding from the post-tax declines experienced in May and June.

In its weekly release the Labor Department stated there were 452,000 initial jobless claims filed for the week, down from the prior week. The weekly number has had a difficult time getting and staying below 450,000 claims. In the news was the slowing of private sector layoffs. Job growth cannot start in earnest until job layoffs slow or cease.

Housing markets are keying on labor. It is difficult to come up with the funds the closing cost calculator is showing you’ll need to purchase a new home if you do not have a job, likewise getting a positive result from the prequalification calculator. The more people who work, the more people who can afford to purchase a new home. The more people buying homes the more stable the housing market. Simple economics that everyone is waiting to see in action in our economy. Keep an eye on the labor statistics to determine the direction of the mortgage and housing markets.

Mortgage rates and applications

Freddie Mac in its Weekly Primary Mortgage Market Survey for October 21, 2010, announced the 30-year fixed rate at a cost of 0.70 points in origination edged up 0.02 percent from the prior week to 4.21 percent. The increase is so trivial as to have very little impact on monthly mortgage payments and is the second lowest rate on record — second only to the record set the prior week.

Taking a breather following recent increases, the prior week mortgage application totals dropped for the week ending October 15, 2010, according to the Mortgage Bankers Association Weekly Mortgage Applications Survey. Overall applications dropped 10.5 percent led by an 11.2-percent drop in refinances. Adjustable Rate Mortgage Applications increased slightly and were 5.8 percent of total applications.

If you are using mortgage calculators to plan your housing and financial future, it pays to keep abreast of economic news that will impact your mortgage rate and purchasing power.

Posted By :
Dennis C. Smith is co-owner and broker of record for Stratis Financial in southern California. He has over twenty years' experience in the mortgage industry.

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