Interest rates

Interest rates for buying a home on the Palos Verdes Peninsula increased slightly this week.The following are excerpts from the newsletter on interest rates published by HSH Associates :

“In the cycle of interest rates, what goes up must eventually come down. The reverse is also true; what goes down will inevitably reverse course — sometimes gently, sometimes more violently. At the moment, we appear to be trending more gently upward, with rates pressed in that direction by mostly solid economic data. In reality, absent dire economic or political news, rates appear to simply be bouncing a little off recent bottoms at the moment.

That’s not to say that rates might not decline anew. There are plenty of troubles in the world, the economy is certainly stronger than earlier this year but not in any outsized fashion, and the acceleration in growth this spring may plateau or even falter a bit as summer approaches. That said, the economy seems to be weathering any number of challenges well, allowing rates to firm a bit.

“Next week, the Federal Reserve Open Market Committee gets together to discuss all of these things and more. It is expected that there will be another trim to QE as we stay the tapering course, so there should be no policy surprise per se. The committee will update its economic projections and it could be that their somewhat rosy expectations may be downgraded to a degree, given the negative start to this year, especially since it would take a very fast rate of growth from here to see us approach a GDP of even 3 percent for all of 2014. It is unlikely that we’ll see much by way in any change in messaging from the Fed; most likely is more of the modest-to-moderate-with-few-price-pressures discussion which has been in place for a while, with expectations that QE will end and rates will start to be lifted sometime in 2015.

Still, any downgrade to projections for growth might signal to the market that rate hikes or policy changes would come later in 2015 rather than sooner, and that could allow for interest rates to ease a little. Most likely, we’ll spend the next week wobbling around a little bit more, possibly adding a couple more basis points to this week’s tally, but we don’t appear to be going anywhere very fast.”

The following are interest rate quotes from American California Financial: