CHART OF THE DAY: The Mortgage Rate Surge Is Unlike Anything We’ve Seen In 26 Years

June 28, 2013 Leave a comment

CHART OF THE DAY: The Mortgage Rate Surge Is Unlike Anything We’ve Seen In 26 Years

SAM RO JUN. 27, 2013, 12:11 PM 1,074 2

The Federal Reserve’s quantitative easing (QE) program involves the monthly purchases of $85 billion worth of Treasury and mortgage bonds.  These purchases have helped keep interest rates historically low. But in the last few months, Fed officials have started talking about tapering QE some time in the near future. The bond markets have been going nuts, selling off in anticipation of the taper. And this has been causing interest rates to surge all over the world. One notable rate that’s been going crazy are mortgage interest rates. “The average 30-year fixed-rate mortgage rose from 3.93 percent last week to 4.46 percent this week; the highest it has been since the week of July 28, 2011,” said the analysts at Freddie Mac. “This represents the largest weekly increase for the 30-year fixed since the week ended April 17, 1987.” Crazy. Fortunately, the markets have been able to absorb them. “Higher mortgage rates may dampen some housing market activity but the effect will be muted by the high level of buyer affordability, and home sales should remain strong,” said Freddie Mac’s Frank Nothaft.  “For instance, existing home sales in May rose to its strongest pace since November 2009 and new home sales were the most seen since July 2008. In addition, the 12-month growth in the S&P/Case-Shiller® 20-city home price index for April of 12.1 percent was the largest since April 2006.”

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Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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