Mortgage rate update

• Mortgage bond prices fell last week pushing interest rates higher. Traders remained concerned about possible future Fed rate hikes in response to the expanding economy and inflationary pressures. However, the weaker than expected new home sales data Friday helped alleviate some of those fears and helped mortgage bonds recover a portion of the losses seen earlier in the week.
• For the week, interest rates on government and conventional loans rose about 1/8 of a discount point.
• The 2-day Fed meeting Monday and Tuesday will be the most important event this week. Foreign demand for the Treasury auctions, income, outlays, consumer sentiment, and factory orders data will also be important.
• The United States central bank, the Federal Reserve, coordinates the borrowing and lending activities of federally chartered banks. The principal reason the Federal Reserve was created was to reduce severe financial crises. One way of accomplishing this goal is to control the amount of money that flows through the economy. By manipulating the US money supply, the Fed influences inflation, unemployment, and the level of US economic activity. The Fed has a variety of tools that it uses to control the money supply, but its chief policy tool is the manipulation of short-term interest rates.
• The Federal Reserve can adjust two distinct short-term interest rates. The discount rate is the interest rate which banks pay the Fed for primarily overnight loans. Despite its name, the Fed funds rate is the rate banks pay to borrow from other banks. The Federal Reserve has direct control over the level of short-term interest rates, the Fed’s influence over longer-term interest rates is less certain.
• The Fed is expected to raise rates again this week. Rates have gradually pushed higher over the past few months.

Now is a great time to take advantage of rates at the current levels and to protect against future rate increases.

Connie Echeverria, Loan Officer
Prosperity Mortgage Company
M4049-011
4400 Jenifer St., NW
Washington, DC 20015
202.364.1300 x6061 Office
202.285.3937 Mobile
202.966.4632 Confidential Fax
866.359.7205 Confidential eFax
connie.echeverria@wellsfargo.com