Federal Reserve to Keep Low Interest Rates Until 2014

Posted on January 27, 2012 by admin

After the conclusion of its Federal Open Market Committee (FOMC) meeting on January 25 , the Feds announced it would maintain record–low interest rates well into 2014.  Many analysts interpret the announcement as a sign that the FOMC do not expect the economy to grow much faster between now and the end of 2014. According to the Federal Open Market Committee, despite a sluggish global economy, the U.S. economy has expanded at a moderate pace. Consumer spending accounts for most of the growth. In fact, businesses have actually curtailed spending on fixed investments, which consist of physical assets like building, land, machinery, vehicles, and technology. In addition, despite a series of positive news regarding housing indicators, the sector continues to weigh down the U.S. economy. The Feds forecast an economic growth rate of 2.2% to 2.7%, for this year. Although Committee members expressed hopefulness about the state of unemployment in the nation, as the rate declined from 8.5% in November to 8.2% for December, slow economic growth will cap job growth. On the inflation front, the Feds believes inflation will remain at or below its objective of two percent going into future quarters. The Federal Reserve Act of 1913 Over 100 years ago, the U.S. Congress passed The Federal Reserve Act of 1913. This controversial piece of legislation gave the Federal Reserve System, often called the “Feds,” the power set the nation’s monetary policy. The Act establishes a Federal Reserve System, which consists of 12 Federal Reserve District Banks — Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago St. Louis, Minneapolis, Kansas City, Dallas and San Francisco. Each Federal Reserve District Bank has a board made up of nine directors. The Bank directors have responsibility for supervising its’ activities, which include the selection of a president. The president functions as chief executive officer and serves a five-year term. The Federal Reserve System’s Board of Governors must approve the Bank’s choice of CEO. Federal Reserve District Banks supervise depository institutions in its region. They provide a variety of services to those institutions as well as the public. They also help determine monetary policy by monitoring and reporting on economic developments in their region of the country. Board of Governors, FOMC and Monetary Policy The seven members of the Board of Governors serve on the 12-member Federal Open Market Committee (FOMC), which has, which has the primary responsibility for developing the country’s monetary policies. The other members of the FOMC are the president of the Federal Reserve Bank of New York and four presidents selected from a grouping of three Federal Reserve Banks, who serve one-year terms on a rotating basis. The FOMC determines monetary policy, which denotes certain actions taken by the Feds. These actions affect the availability of money, credit and interest rates as it relates to supporting the economic goals of the country.

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Federal Reserve to Keep Low Interest Rates Until 2014

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2011 New Home Sales Reach Record Low

Posted on January 27, 2012 by admin

The US Census Bureau and Commerce Department released on January 26 the December 2011 New Residential Sales report.   The report releases the numbers on new home sales with several points of statistical data on housing trends. The report’s most glaring statistic was the record low of new home sales in the United States, with only 302,000 new homes sold in 2011.  Prices for new homes are also near historical lows, with the average new home selling for just over $210,000. The 302,000 new homes sold is a record low since 1963, when the government began keeping track of the numbers.  Even with record low interest rates, many potential homebuyers are reportedly having a difficult time finding loans, as the industry has tightened standards and access to money is difficult.  The last few years have shown a general downward trend in new homes purchased. However, a trend in overall home sales appears to be generally rising, with recent reports showing an overall increase with existing home sales, and foreclosures and short sales are still in ample supply – which is another reason for the decrease in new home sales. The general housing supply is close to the average.  A 6-month supply of homes is still for sale on the market.

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2011 New Home Sales Reach Record Low

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Chicago Mortgage Rates Survey – Week of January 20, 2012

Posted on January 27, 2012 by admin

According to a recent Primerates.com survey of Chicago mortgage rates offered by the largest area banks & credit unions, most of the Chicago area banks continued to offer rates in the low 4% range.  Fifth Third Bank ( www.53.com ) had the lowest rate of 3.99% on 30-year fixed -rate conforming loans in the Chicago metro area for well-qualified borrowers.  Citibank ( www.citibank.com ) and Bank of America ( www.bankofamerica.com ) both had rates of about a quarter percent more at 4.25%. For those who are approaching the end of the “fixed” period of an Adjustable Rate Mortgage (ARM), refinancing may be a good idea even if it does not result in a lower interest rate.  The Fed has kept interest rates extremely low for quite some time, and banks would be hard pressed to offer mortgages at lower rates than they currently do.  If a person’s rate were to start adjusting in the next year, now may be the time to lock in a slightly higher rate than what an ARM offers, but considerably less than what the rate could adjust to as the Fed starts to push rates higher.  Refinancing into another ARM is always an option, but in a few more years, when the rate is about to adjust again, the other options may not be as reasonable as they are now. Top Chicago Area Banks and Credit Unions As of 30-year Fixed 15-year Fixed 5/1 ARM Fifth Third Bank 01/21/12 3.99% 3.25% NA JP Morgan 01/21/12 4.00% 3.25% 2.38% US Bank National 01/20/12 4.00% 3.38% 2.75% PNC Bank National 01/21/12 4.13% 3.25% NA First Midwest Bank 01/18/12 4.13% 3.50% 3.38% RBS Citizens National 01/20/12 4.13% 3.38% 2.75% Bank of America 01/21/12 4.25% 3.50% 3.13% Citibank 01/21/12 4.25% 3.50% NA   Listed rates from banks, thrifts and credit union were listed on their websites on the date indicated for conforming loans with 0 points.  Data is believed accurate at time of collection, can change without notice, and will vary based on an individual’s credit history.  Contact a specific institution for current rates.

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Chicago Mortgage Rates Survey – Week of January 20, 2012

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Los Angeles CD Rates Survey for the Week of January 23, 2012

Posted on January 27, 2012 by admin

According to a recent Primerates.com survey conducted on January 23, 2012 of Los Angeles CD rates offered by the area banks & credit unions, Los Angeles’ largest financial institutions offered short-term savers 6 month CD’s with rates between 0.05% at Wells Fargo ( www.WellsFargo.com ) and US Bank National ( www.USBank.com ) and a highly competitive 0.75% at OneWest Bank ( www.OWB.com ).   OneWest Bank continues to have the highest returns for all CD rates, ranging from a 1-year rate at 0.90% to a 5-year CD at 1.64%. CD’s are typically insured up to $250,000 by the FDIC.  As CD’s mature, banks typically re-price the rates on deposits.  Make sure that you track when your CD’s mature so that you can roll them over into new CD’s and keep your money working as hard as possible.   Bank 6 month 1 year 2 year 3 year 4 year 5 year Bank of America 0.30% 0.35% 0.40% 0.60% 0.85% 1.19% Wells Fargo 0.05% 0.05% 0.40% 0.65% 1.15% 1.15% Union Bank 0.20% 0.30% 0.50% 0.60% 1.00% 1.49% JP Morgan Chase 0.20% 0.25% 0.40% 0.50% 0.50% 1.00% Citibank 0.15% 0.25% 0.30% 0.50% 0.75% 1.00% Onewest Bank 0.75% 0.90% 1.05% 1.19% 1.29% 1.64% U S Bank National 0.05% 0.10% 0.45% 0.70% 1.00% 1.39% Cathay Bank 0.40% 0.60% 0.70% 0.80% 0.80% 0.80% Comerica Bank 0.15% 0.20% 0.30% 0.40% 0.65% 1.00%   Rates from banks, thrifts and credit union were posted on their websites on the date indicated for a $10,000 certificates of deposit meeting the specific holding requirement.  Data is believed accurate at time of collection, can change without notice, and will vary.  Contact a specific institution for current rates.

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Los Angeles CD Rates Survey for the Week of January 23, 2012

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Houston CD Rates Survey for the Week of January 23, 2012

Posted on January 27, 2012 by admin

According to a recent Primerates.com survey conducted on January 23, 2012 of Houston CD rates offered by the area banks & credit unions, Houston’s largest financial institutions offered short-term savers 6 month CD’s with rates between 0.05% at Wells Fargo ( www.WellsFargo.com ) and 0.30% at Bank of America ( www.BankofAmerica.com ).   Compass Bank continues to have the highest returns for all other CD rates, with an attractive 2-year 1.24% CD and 5-year 1.98% CD. CD’s are typically insured up to $250,000 by the FDIC.  As CD’s mature, banks typically re-price the rates on deposits.  Make sure that you track when your CD’s mature so that you can roll them over into new CD’s and keep your money working as hard as possible.   Banks 6 month 1 year 2 year 3 year 4 year 5 year JP Morgan Chase 0.20% 0.25% 0.40% 0.50% 0.50% 1.00% Wells Fargo 0.05% 0.05% 0.40% 0.90% 1.15% 1.15% Bank of America 0.30% 0.35% 0.40% 0.60% 0.85% 1.20% Compass Bank 0.25% 0.50% 1.24% 0.95% 1.24% 1.98% Amegy Bank 0.10% 0.10% NA NA NA NA Sterling Bank 0.15% 0.20% 0.30% 0.35% 0.60% 0.95% Capital One 0.20% 0.20% 0.30% 0.50% 0.70% 1.00% Frost National Bank 0.20% 0.25% 0.40% NA NA NA Comerica Bank 0.15% 0.20% 0.30% 0.35% 0.60% 0.95% Bank of Oklahoma 0.25% 0.30% 0.50% 0.60% 0.85% 1.14%   Rates from banks, thrifts and credit union were posted on their websites on the date indicated for a $10,000 certificates of deposit meeting the specific holding requirement.  Data is believed accurate at time of collection, can change without notice, and will vary.  Contact a specific institution for current rates.

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Houston CD Rates Survey for the Week of January 23, 2012

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What Cordray Didn’t Say: The First Steps of the Consumer Financial Protection Bureau

Posted on January 26, 2012 by admin

Richard Cordray, Director of the Consumer Financial Protection Bureau, used his first public appearance since his appointment to explain how the Bureau will accomplish its goals.  In his short speech, Cordray revealed a vague to-do list for the agency.  He provided neither a timetable for action nor a definitive outline of penalties for rule-breakers. Cordray’s focus on the years ahead led members of his audience to ask him few questions. Cordray gave the speech to a Republican-controlled subcommittee of the House Oversight Committee. He held back from describing the past abuses of banks and nonbanks.  Cordray’s deliberate reserve left President Obama with plenty of material to stir up emotion in Tuesday’s State of the Union address. At the SOTU address, Cordray was introduced by Obama.  He then sat in the First Lady’s box. Senator Scott Brown (R-Mass.) was the only Republican to stand and applaud when Obama mentioned Cordray’s name.  Brown is running against Elizabeth Warren, the political force behind the creation of the Bureau. Cordray’s choice to steer away from volatile rhetoric helped portray him as a calm, careful leader.  Yet Cordray is not as impartial as he seems.  He served as the chief of the Bureau’s enforcement unit before Obama named him as director. Among the more controversial statements in Cordray’s speech was a declaration that the Bureau will consider filing lawsuits against institutions that violate the Bureau’s rules.  Representative Darrell Issa (R-Calif.), chairman of the full Oversight Committee, asked what Cordray would do if a court ruled that the Bureau had no authority.  Issa’s remark was a jab at Obama, whose January appointment of Cordray remains controversial.  Cordray replied to Issa that in the event of such a decision, he would be open to suggestions. Among Cordray’s less contested statements were updates on the Bureau’s consumer education campaign, “Know Before You Owe.”  This campaign is set to provide consumers with clear, accurate information about financial products such as residential mortgages, student loans, and credit cards.  Cordray said that with respect to some matters, the Bureau is still only beginning to develop content and make it accessible. Cordray further used his speech to remark upon the Bureau’s progress in launching its large bank supervision program. This program will require banks with over $10 billion in assets to abide by federal consumer protection laws.  In addition, Cordray recognized the role of several offices within the Bureau.  Among these were the Office of Fair Lending and Equal Opportunity, the Office of Servicemember Affairs, and the Office of Financial Protection for Older Americans. Cordray’s characterization of certain business plans directed at senior citizens as “scams and frauds” was one of the most passionate moments of his speech. As Washington heads into election season, Cordray’s speeches are likely to attract more attention.  The actions that the Bureau takes are likely to greatly affect how Congress and the public perceive Obama’s administration.  Cordray’s next speech promises to be more exciting.  It should indicate whether a federal agency can encourage rapid, significant financial reform.

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What Cordray Didn’t Say: The First Steps of the Consumer Financial Protection Bureau

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Boston Mortgage Rates Survey – Week of January 20, 2012

Posted on January 26, 2012 by admin

According to a recent Primerates.com survey of Boston mortgage rates offered by the largest area banks & credit unions, most banks in the Boston area offered rates around 4%.  Sovereign Bank ( www.sovereignbank.com ) was just barely under 4% at 3.99%.  Rockland Trust ( www.rocklandtrust.com ), and Century Bank and Trust ( www.centurybank.com ) both offered rates of 4%, while Bank of America ( www.bankofamerica.com ) rounded out the offerings with 4.25% on 30-year fixed -rate conforming loans in the Boston metro area for well-qualified borrowers. While most people will refinance their loan because they want to save money on their interest payments each month, that can mean reducing the term of the loan.  Refinancing from a 30-year mortgage to a 15-year mortgage may in fact increase the amount paid each month, but the length is cut in half.  Not only will a person be paying less in interest, they will also be paying for a shorter period of time.  But it should be kept in mind that on a 30-year loan there are almost no lenders that charge penalties for early repayment.  So instead of switching to a 15-year product, and creating higher required monthly payments, the borrower can keep the 30-year product and simply pay more toward principal every month.  There is no product that is the right product for everyone, and each person must take his or her own earnings and future earnings into consideration when crunching the numbers to decide how they want to refinance. Top Boston Area Banks and Credit Unions As of 30-year Fixed 15-year Fixed 5/1 ARM Sovereign Bank 01/20/12 3.99% 3.25% NA Rockland Trust 01/20/12 4.00% 3.38% 3.00% Century Bank and Trust 01/20/12 4.00% 3.38% 3.00% RBS Citizens 01/20/12 4.13% 3.38% 2.75% Danvers Bank 01/20/12 4.13% 3.38% 3.00% Bank of America 01/20/12 4.25% 3.50% 3.13% Boston Private Bank and Trust 01/20/12 NA 4.13% 3.38%   Listed rates from banks, thrifts and credit union were listed on their websites on the date indicated for conforming loans with 0 points.  Data is believed accurate at time of collection, can change without notice, and will vary based on an individual’s credit history.  Contact a specific institution for current rates.

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Boston Mortgage Rates Survey – Week of January 20, 2012

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New York City CD Rates Survey for the Week of January 23, 2012

Posted on January 26, 2012 by admin

According to a recent Primerates.com survey conducted on January 23, 2012 of New York City CD rates offered by the area banks & credit unions, New York City’s largest financial institutions offered short-term savers 6 month CD’s with rates between 0.05% at Wells Fargo ( www.WellsFargo.com ) and 0.60% at Hudson City Savings Bank ( www.HCSB.com ).   Hudson City continues with the highest rates in New York City as it has for several weeks, with nearly all of its CD rates well above other banks’ offerings.  HCSB has a particularly high 1-year rate at 0.84%, which is more than double any other 2-year CD in New York City. CD’s are typically insured up to $250,000 by the FDIC.  As CD’s mature, banks typically re-price the rates on deposits.  Make sure that you track when your CD’s mature so that you can roll them over into new CD’s and keep your money working as hard as possible.   Banks 6 month 1 year 2 year 3 year 4 year 5 year JP Morgan Chase 0.20% 0.25% 0.40% 0.50% 0.50% 1.00% Bank of America 0.30% 0.35% 0.40% 0.60% 0.85% 1.20% Citibank 0.15% 0.25% 0.30% 0.50% 0.75% 1.00% HSBC 0.10% 0.20% 0.35% 0.35% 0.80% 0.80% Wells Fargo 0.05% 0.05% 0.55% 0.90% 1.15% 1.15% Capital One 0.20% 0.20% 0.30% 0.50% 0.70% 1.01% TD Bank 0.30% 0.20% 0.80% 0.90% 1.00% 1.74% Hudson City 0.60% 0.84% 1.13% 1.37% 1.57% 1.81% Sovereign Bank NA 0.20% 0.20% 0.30% NA NA PNC Bank 0.15% 0.25% 0.45% 0.45% 0.85% 1.05%   Rates from banks, thrifts and credit union were posted on their websites on the date indicated for a $10,000 certificates of deposit meeting the specific holding requirement.  Data is believed accurate at time of collection, can change without notice, and will vary.  Contact a specific institution for current rates.

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New York City CD Rates Survey for the Week of January 23, 2012

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Atlanta CD Rates Survey for the Week of January 23, 2012

Posted on January 26, 2012 by admin

According to a recent Primerates.com survey conducted on January 23, 2012 of Atlanta CD rates offered by the area banks & credit unions, Atlanta’s largest financial institutions offered short-term savers 6 month CD’s with rates between 0.05% at Wells Fargo ( www.WellsFargo.com ) and 0.25% at SunTrust Bank ( www.Suntrust.com ) and United Bank ( www.AccessUnited.com ).   United Bank also continues to offer higher rates for all longer-term CD maturities, ranging from .60% 1-year CD’s to 1.45% for a 5-year CD. CD’s are typically insured up to $250,000 by the FDIC.  As CD’s mature, banks typically re-price the rates on deposits.  Make sure that you track when your CD’s mature so that you can roll them over into new CD’s and keep your money working as hard as possible.   Banks 6 month 1 year 2 year 3 year 4 year 5 year SunTrust Bank 0.25% 0.45% 0.65% 0.85% 0.85% 1.29% Wells Fargo 0.05% 0.05% 0.55% 0.90% 1.15% 1.15% Bank of America 0.20% 0.35% 0.40% 0.60% 0.85% 1.19% Regions Bank 0.15% 0.15% 0.25% 0.55% 0.75% 0.85% State Bank & Trust 0.20% 0.30% 0.55% 0.80% 0.95% 1.00% JP Morgan Chase 0.20% 0.25% 0.40% 0.50% 0.50% 1.00% United Bank 0.25% 0.60% 0.75% 1.05% 1.25% 1.45%   Rates from banks, thrifts and credit union were posted on their websites on the date indicated for a $10,000 certificates of deposit meeting the specific holding requirement.  Data is believed accurate at time of collection, can change without notice, and will vary.  Contact a specific institution for current rates.

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Atlanta CD Rates Survey for the Week of January 23, 2012

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How Do Prime Rates Work?

Posted on January 25, 2012 by admin

How do Prime Rates work? You’ll need to know if you’re applying for any kind of short-term loan.

The Prime Rate is the lowest rate of interest possible for a loan and what every bank or lender will use to determine your loan’s rate of interest.

The bank you go to get your loan will measure the Prime Rate against your credit to decide the interest rate you’re given. The better credit you have the closer to the Prime Rate your own interest rate will be. It is doubtful that most Americans will get this rate as their interest rate, although if your credit is truly stellar you may get a rate lower than the Prime Rate.

Now that you understand how Prime Rates work, how is the Prime Rate decided?

  • Every major US bank has their own Prime Rate
  • When the majority of US banks change their Prime Rate, the Wall Street Journal will update their Prime Rate (the WSJ’s Prime Rate is the most nationally recognized).
  • In the past the Wall Street Journal would only update their rate when 23 out of the nation’s 30 top banks changed theirs, but now will change it when seven of the top ten change

The Prime Rate is closely related to another rate, the Federal Funds Target Rate. The Fed Funds Target Rate is the rate which banks charge each other for loans and is determined every six weeks by the Federal Open Market Committee.

To make the Prime Rate, banks take Federal Funds Target Rate and add three percent to it. The current Federal Funds Target Rate is .25 percent, making the Prime Rate 3.25 percent.

The Federal Open Market Committee meets every six weeks to decide the Federal Funds Target Rate, so every six weeks the Prime Rate can change (though it has stayed the same for the past three years and most likely will stay unchanged for some time).

Knowing how Prime Rates work is incredibly important to negotiating the rate of interest of any loan. The Prime Rate is simple to calculate, well known through the Wall Street Journal and very helpful to anyone taking out a short-term loan.

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