Provided by Corey Phelps, Front Street Mortgage
Mortgage rates continued their recent trend lower on the perception that the economy is slowing even more than expected. Economic weakness generally leads to less inflation, which tends to produce lower mortgage rates. Confirmation of an economic slowdown was provided in a speech by Fed Chief Bernanke on Thursday. Calling the December Employment report “disappointing”, he suggested that the Fed is prepared to take “substantive” action and that further easing may well be necessary in light of the risks of a slowing economy. Investors interpreted his remarks to mean that the Fed will be likely to cut rates more aggressivly than previously expected, and they now price in a near certainty of a half point rate cut at the next meeting on January 30.
Bank of America announced that it had reached an agreement to acquire Countrywide Financial. The news came as concerns aboutCountrywide’s solvency were causing unease in the market, but the pending acquisition has helped to ease those fears. A bankruptcy of Countrywide would not have been a good thing for the mortgage industry and its ripple effects would have been felt throughout the economy.
In the housing sector, November Pending Home Sales fell slightly from the prior month, leaving them 19% lower than one year ago. Pending Home Sales are a leading indicator of future housing market activity, meaning that the next Existing and New Home Sales reports may show declines. Seperately, the National Association of Realtors (NAR ) released a revised forecast last week, in which they increased slightly their expectations for housing market activity in 2008.
For further expert mortgage advice please fell free to email me at corey@frontstreetmtg.com. or visit us at www.frontstreetmtg.com
