Rates, Politics, and Rumors
According to government-sponsored loan buyer Freddie Mac, mortgage rates have finally ended their five-week descent after this latest rate cut to the federal funds rate.
Freddie Mac reports that 15-year fixed-rate loans average 5.17% opposed to a 6.06% average this time last year. Believe it or not, this is actually higher than it was last week (4.95%).
While lower rates excite consumers, it is by no means a cure-all. While rates plummet, banks become less enthusiastic to lend money (as their profits are being lowered). In addition overseas investors shy away from the dollar, which not only lowers the value of the dollar, but it also causes inflation.
What makes this economic turn of events even more interesting is that it comes during primary election time which means these issues will inevitably determine who will be responsible for running the nation for the next four years. Recent surveys prove that economy concerns has surpassed the war in Iraq as the main focal point on the minds of American voters.
In addition, many feel that the Republican led government is heavily responsible for this economic deterioration. Democratic candidates hope that slow job creation and lagging wages during the Bush Administration’s term will spur Americans to vote for change in this upcoming election.
The market received a wealth of economic information on the first days of February which unfortunately shows quite a mixed state of affairs. Despite the economy’s record-setting run of 52 consecutive months of job creation came to a screeching halt, the latest numbers say that domestic manufacturing in January looked surprisingly well. Since job growth and recession cannot occur at the same time, it’s looking like many initial fears of a long, drawn out recession may be a myth after all. We’ll keep a close watch and keep you posted as well.
