Goal of Fed’s Operation Twist

The stocks of banks have been unpredictable since the Federal Reserve’s announcement to push the interest rates lower in the long run. On the positive side, “Operation Twist” is created to stimulate loan growth, a challenging aspect in their operations as a result of the recession. At the same time, most financial institutions have been hesitant to provide loans while they are trying to improve their balance sheets that are affected by the real estate collapse in 2008.

According to the Fed’s statement, the economy is slowly growing, the rate of unemployment is high and the housing market is continuously collapsing. The central bank provided a statement saying that the goal of operation twist is to lower the borrowing cost of consumers and businesses together with the price of mortgage loans. It expects the lower rates to entice companies to construct new factories and hire additional employees. It also anticipates consumers to begin spending their money for purchasing cars, homes, clothes as well as for traveling.

In the past quarters, main banks have started to show credit quality improvements. More careful credit checks have resulted to lesser loan delinquencies and higher financial stability. With this, banks are allocating less money to spend for bad loans and some are observing the decrease in loan losses. While the quality of credit gets better, the increasing unemployment rate has been adversely affecting the long term growth of banks’ loans.

Operation Twist also comes with controversies. Richard Fisher, Federal Reserve Bank of Dallas’ President said that he is against the recent attempts of the Fed to stimulate the growth of the economy fearing that it may not work, intimidate consumers and constrict bank earnings. He added that Operation twist may be counterproductive. Consumers might think that the Fed believes that the economic condition is much worse than they perceive which may encourage them to store money, said Fisher.

Related articles

• Lending picks up at big banks (seattletimes.nwsource.com)
• Fed Will Try to Drive Interest Rates Even Lower (abcnews.go.com)

Low Mortgage Rates Continue
The standard of 30-year fixed mortgage rate is at a new low record for the third straight week with a reduction to 4.35%, according to the weekly survey of Bankrate.com. In the previous week, this was at 4.37%. The average 30-year fixed mortgage has an estimate of 0.38 mark down and origination points.
A complete listing of mortgage rates in different areas can be found at http://www.bankrate.com/funnel/mortgages/

The mean rate for 15-year fixed mortgage stayed at 3.48% while that of the 30-year fixed mortgage is at 4.86%. The trend of the adjustable mortgage rates is different. For a 5-year adjustable mortgage, the rate is moving higher to 3.1%. On the contrary, the 7-year adjustable mortgage rate is getting lower to 3.21%.
Bankrate.com conducts their weekly survey every Wednesday. It uses the data given by top 10 banks. The results of its survey are also based from the record provided by top 10 markets’ thrifts.

A bad employment report pulled down the mortgage rates for the sixth straight week. Fears of a threatening recession and continuous economic depression have increased the attractiveness of long-term Treasury securities, with very low projected returns. Fixed mortgage rates and mortgage-backed bonds’ profits are highly correlated with the returns on 10-year Treasury notes. Although there is a possibility that the Federal Reserve will find ways to decrease the long term interest rates even further as a way to continue lowering mortgage rates, growing the number of qualified refinancers will make the low rates of mortgages impact the economy at a bigger scale.

The last period when mortgage rates were above 6% was in November of 2008. Specifically, the average rate for a 30-year fixed mortgage during that time was at 6.33%. So a loan of $200,000 back then required a monthly payment of $1,241.86. With the present rate of 4.35%, the same amount of loan will only charge $995.62 for monthly payment. This is a $246 difference every month for anyone who is refinancing at the current rate.

Why is it Time to Refinance? Is it the best time to get a Mortgage Refinance?

Interest rates on mortgages have continuously declined to reach its lowest level in recorded history. This is a strong proof that it is already the best time for homeowners to consider refinancing in order to generate some savings.

The rate for a 30-year fixed mortgage was at an average of 4.39% during the end of the Aug 4 week. Similarly, the rate for a 15 year fixed mortgage decreased to 3.54% despite the reduction in bond yields and signs that show a weaker economic standing than what is expected said the Primary Mortgage Market Survey of Freddie Mac.

The president of Metropolitan Boston Real Estate, Nebury Street brokerage, said that this is good news because this will serve as a motivation for anyone who is considering refinancing knowing that the low rates won’t stay very long.

Here are the possible savings that homeowners can generate: for a mortgage of $250,000 with 5% interest, they could save about $160 monthly and $2,020 yearly if they refinance the loan for 4.39%. These savings provide a guaranteed cash in the bank during these present times when traditional savings account have nearly zero percent in returns and the gyrations in the stock market have exhausted the investment accounts.

Bankrate.com’s senior financial analyst Greg McBride said that anybody who decides to refinance at these very low rates are sure beneficiaries of the economic concerns and Wall Street challenges.
The three lenders listed in Bankrate.com that offers 30 year fixed loans with less than 4.39% interest are AimLoan.com at 4.19%, Loan Depot at 4.25% and American Interbanc.com at 4.35%. All three are offered with zero points.

Albano said that even if the low rates are great news for most mortgage owners who pass the requirements of credit and equity to qualify for refinancing, potential buyers will still not leave the sidelines. He thinks that people who are observing the rates and decides that they are not ready to purchase at 4.5% will change their mind when the rates fall at 4.3%.

If you are looking to refinance your mortgage, then you may want to consider doing it soon. As you may know, last Friday, Standard and Poor’s downgraded US treasuries from AAA to AA+. This is the first time in history that the U.S. has had a downgrade.

Then, on Monday, Standard and Poors also downgraded Fannie Mae and Freddie Mac. While it is unclear as to the final effects of the downgrade, many financial experts are prediciting that the cost of money will go up, effectively raising interest rates.

If this happens, it could be problematic for an already sluggish economy,a nd could further depress the already lagging housing market. Higher interest rates would effectively make home ownership more expensive.

As for those with bad credit or poor credit, these changes could put you completely out of the market. While the agencies push to regain their credit ratings, they may be forced to be even more conservative with lending practices, and that would make credit or loans for people with bad credit almost out of reach.

Related searches for should I refinance my home:

mortgage rates
mortgage calculator
current mortgage rates
current interest rates
countrywide

should i refinance my home now
current mortgage interest rate
should i refinance my home loan
refinance my home
should i refinance

will i refinance my home
must i refinance my home
need to i refinance my home
could i refinance my home
would i refinance my home

Related articles

• US debt downgrade could mean rate hikes for all (seattletimes.nwsource.com)
• S&P Downgrade Could Feed Home Buyer ‘Anxiety’ (blogs.wsj.com)
• Economy sends mortgage rates down to new 2011 lows (hsh.com)

Lawmakers are passing a bill as a second attempt to control the industry of payday lending. During the previous year, lobbyists and politics had a big role in creating legislations for the purpose of regulating an industry that is said to take advantage of vulnerable residents.

The sponsored act of Rep. Gordon Hintz, D Oshkosh entitled Predatory Lending Consumer Protection Act blocks auto title loans and sets limits to the loan amount. Specifically, the maximum amount must be at 35% of the gross monthly income. However, this act did not put the same cap of 36% to interest rates.
Spending huge amounts, lobbying lawmakers and contributing to campaigns were all done by the payday lending industry to fight the bill.

At present, two Republicans namely Rep. Evan Wynn, R-Whitewater, and Sen. Glenn Grothman, R-West Bend, are submitting a proposal to the legislature for a 36% limit to payday loan interest rates.
This new bill is also co-sponsored by Hintz. It was Wynn who sought information from Hintz and banking industries to work on the proposal. Wynn praised the work of Hintz and his colleagues in the previous session and blamed lobbyists for the failure of the interest rate cap proposal.

A Payday loan is a small amount, high interest loan with a short payment period. Typically, a payday loan is paid on the next paycheck of the borrower. The usual charge amounts to $20 for every $100 of loan. However, when the borrower fails to pay during the specified period, the debt is rolled over and the interest charges pile up.

The payday lending industry began in Wisconsin in 1995. Back then, interest rates were at 18 percent maximum. Eventually, 17 payday lenders emerged in the state. At present, there are about 550 of them.
According to Hintz, it is expected that the payday loan industry is preparing to prevent the bill on interest rate cap from becoming a law.

Related articles

• Payday Lending’s Final Days? Not by a Long Shot, Reports AboutPaydayLoan.com (prnewswire.com)
• Payday Loan Lenders Under Fire (nowpublic.com)
• Should interest rates be capped? (cleardebt.co.uk)

Where Can I Get the Lowest Rate?

Start by calling your current mortgage lender and your bank or credit union. you can also get on the internet and do some searches on the keywords getting low interest rates. Some mortgage brokers may be able to give you a wholesale rate that beats the rate from a bank’s loan officers. Known as correspondent lenders, they are typically large brokers that do the underwriting and immediately sell the loans they originate to wholesale lenders or investors — meaning they can both find you a loan and approve it. If you’re trying to consolidate loans, a mortgage broker may also offer more options than a retail loan officer. However, some lenders prohibit brokers from originating loans of more than $417,000.

If you have an existing relationship with a bank, then it may be a good idea to get with them and start the discussion about what you can do to get a better interest rate.

When you’re ready to get rate quotes, call your prospects in the late morning (eastern time), when lenders have issued the day’s rate sheets but before any changes are made to them. Each lender with whom you apply must give you a good-faith estimate, and you can use the GFE to compare lenders’ offerings. You don’t have to pay an application fee to get a GFE, but you might have to pay about $50 for the lender to pull your credit report. GFE= good faith estimate….

Don’t be afraid to talk with your lender… ask them about different programs, and ask them about what kinds of things you can do to get better payments.

You never know what is out there, and you never know what you can get until you ask…

so start asking….

Remember, you can save hundreds of dollars by getting lower interest rates, and you may quailfy for things you didn’t know you qualified for….