Record Low Mortgage Rates a Thing of the Past

by Anirban Basu 19. August 2013

Anirban BAsu

It was only a Matter of Time

We knew they wouldn’t last forever. An extraordinary confluence of circumstances, including a deep recession, deflationary forces and hyper-aggressive monetary policy, produced the lowest mortgage rates in history. As of July of last year, interest rates on benchmark 30-year fixed-rate loans were hovering around 3.5 percent, sometimes lower. They bottomed out at the end of November, when rates hit an unheard of 3.31 percent according to the Freddie Mac Primary Mortgage Market Survey. Until the last few weeks, these rates had managed to remain below 4 percent despite ongoing economic recovery.

But the mere possibility of slower bond purchases by the Federal Reserve produced a surge in mortgage rates. Recently, these rates have been in excess of 4.5 percent, a level that hasn’t been observed in over two years. As pointed out by MoneyWatch and other publications, at the end of June, rates leapt nearly 0.5 percent, producing the largest week-over-week increases in more than a quarter century. Many economists viewed the bond market’s reaction to possible Federal Reserve policy shifts as overdone, but rates have not declined significantly since their initial surge.

For those who prefer to view the glass as half-full, the rise in mortgage rates is to a large extent the product of better economic news. The nation is now in its fifth year of economic recovery. It has added more than 2.2 million jobs over the past year, including nearly 200,000 in construction.

Improvement in the housing market has taken center stage. Since the final quarter of 2011, advances in homebuilding have been responsible for roughly a fifth of total economic expansion. As a result of improvements in homebuilding and remodeling, housing’s overall share of the economy is gradually climbing back toward historic norms.

Correspondingly, the housing sector, which led the economy into recession in late-2007 and into near financial collapse in September 2008, no longer needs as much monetary policy support as it once did. Home prices are now rising, creating a level of urgency among prospective buyers that did not exist during earlier stages of the economic recovery.

According to the S&P/Case-Shiller Index, a leading measure of U.S. home prices, average prices rose 11.6 percent and 12.1 percent for the 10- and 20-City Composite indices for the 12 months ending in April 2013. Atlanta, Dallas, Detroit and Minneapolis posted their largest annual gains since the inception of these indices. Atlanta, Las Vegas, Phoenix and San Francisco generated year-over-year gains exceeding 20 percent.

In Maryland, median sales prices are up 5.9 percent over the past year (June 2012 versus June 2013) and average sales prices are up 4.3 percent. Unit sales are up 13.1 percent.

Looking Ahead

It is quite possible of course that the recent rise in mortgage rates will slow progress in the housing market going forward. Already, there has been major impact in the market for mortgage refinancing, with refinancing demand recently slipping to a 2-year low.

To date, loan applications for home purchases have not been as significantly impacted. With mortgage rates having risen, some prospective purchasers have undoubtedly reconsidered their selection of mortgage product, with more opting for adjustable rate mortgages than would have had rates remained unchanged. That flexibility allows would-be buyers to continue to benefit from ultra-low rates even in a rising rate environment. Moreover, the latest data continue to indicate rising home prices, which means that the motivation to purchase and enjoy future appreciation still remains.

Anirban Basu, Economist, Sage Policy Group, Inc. & First Mariner Bank Board Member

Anirban Basu is Chairman & CEO of Sage Policy Group, Inc., an economic and policy consulting firm in Baltimore, Maryland. Basu is one of the Mid-Atlantic region's most recognizable economists, in part because of his consulting work on behalf of numerous clients, including prominent developers, bankers, brokerage houses, energy suppliers and law firms. On behalf of government agencies and non-profit organizations, Basu has written several high-profile economic development strategies, including co-authoring Baltimore City's economic growth strategy. His opinions do not necessarily reflect the opinions and beliefs of 1st Mariner Bank.

Summer Food Savings: Buy Local

by Renee' Anderson 12. August 2013

Fresh Local Produce

Along with the hot summer sun comes delicious fresh produce! With the health food/organic craze, more and more people are investing in what they eat. And, when I say investing, I do mean investing. Buying fresh, organic produce can be pretty expensive. However, beginning in late spring, there are ways to cut your food bill and still eat healthy.

Based on Maryland’s climate, now is the perfect time to enjoy locally grown produce. The savings on local produce varies depending on what and how much you’re purchasing, but the bottom line is, you WILL save money. Instead of paying mark-ups on tomatoes shipped from California, you can pick one from your own backyard, or grab some from your local farmer’s market. Not only are you saving money, but the quality of the food is SO MUCH better. I tend to exaggerate often, but seriously, the difference in fresh produce and several day old produce is remarkable.

Another option, if you are able, is to grow your own goods! Prepare a garden in your backyard. If there’s not enough room, be creative. Throw some veggies along the side of your house that gets the most sun. Or, you can even grow some veggies in pots on your patio/deck/front stoop. Last night I walked out to my garden and pulled a green bell pepper off my plant, went inside, cut it up and as soon as I bit into it I felt a huge sense of satisfaction. The pepper was delicious and so much better than what I buy in the wintertime at the grocery store. It was crisp, juicy, sweet and full of flavor!

One more benefit of buying local produce is you’re helping to support our local businesses. As a local bank, 1st Mariner is continuously finding ways to support our community. You can too!

Here is a list of some local farmers' markets you might want to try out:

Baltimore Farmers' Market and Bazaar

Baltimore County Farmers' Market at the Maryland State Fairgrounds

Bel Air Farmers' Market

Westminster Farmers' Market

Anne Arundel County Farmers' Market

Howard County Farmers' Market

If you enjoyed this article, be sure to check out these related articles:

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How to Change Banks in 5 Simple Steps

by Stacy Tharp 2. August 2013

Shop for New Bank"I hate my bank!” It seems like you’ve uttered these words a million times, yet you keep going back for more. But why? Changing banks is simpler than you might think. Plus when you take into consideration all of the headache and hassle you’ll free yourself of, these simple steps it takes to change banks will seem even simpler.

1) Figure Out Why You Are Not Satisfied with Your Bank

This might seem like an easy question to answer, as you may have been complaining about the reasons you do not like your bank for a while. But make sure you are certain of specifically what it is that you are not satisfied with so you don’t make the same mistake again. Break down the problem to the source. Are you being charged too many fees? Is that because your bank doesn’t offer an account that meets your needs? Are you getting too many ATM fees because of limited ATM locations? Or, are you unable to get the help you need when you have questions about fees or other issues?

2) Find a Bank That Fits Your Needs and Open Your Account

So you’ve identified the problem, now it’s time to find a solution. Do your research and open an account at a bank that fits your needs. In today’s world, most of your research and even the account opening can be done from the comfort of your own home. Simple, I tell you! As much as it may hurt, you do not want to close your old bank account(s) quite yet…just try to hold on a little longer!

3) Switch Your Direct Deposit

If you do not use direct deposit, you can skip this step. If you do, go ahead and get your paychecks deposited into your exciting new account. You should be able to fill out a simple form at work to do this.

4) Switch Automatic Bill Payments

Once you have your direct deposit set up, it’s time to switch all automatic transfers and payments you have set up. Take a look at your transactions over the last month to make sure you don’t miss any regular monthly payments. Then try to think about any other automatic payments you make either quarterly, annually, or sporadically.

5) It's Time! Close Your Original Account

Make sure all checks and payments from your old account have cleared and you should be good to go. You’ll want to make sure you don’t leave your old account open to avoid any inactivity or low balance fees. Don’t let your old bank collect any more from you. Once you close your old account, you will have successfully completed the simple steps to change banks!

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