June 8 2006

[Troy]

For the week of Jun 26, 2006 --- Vol. 4, Issue 26

Last Week in Review

QUIZ YOURSELF:* TRISKAIDEKAPHOBIA IS THE A) FEAR OF CRACKERS; B) FEAR OF PLAYING CARDS; OR C) FEAR OF THE NUMBER 13. If you guessed C, you are right on — it's the fear of the number 13, which has always traditionally been considered unlucky. Many buildings have no 13th floor, hotels will often skip room 13, and some airplanes were even built with no 13th row. And the Bond market has sure found it to be an unlucky number, now with 13 consecutive losing days in a row! With Bond prices moving lower for thirteen straight days, home loan rates have been climbing higher. For last week, there wasn't much economic news of note, so what gives? It appears the market is weighing heavy in advance of next week's big plate of economic news, which includes the highly anticipated Fed meeting on Thursday, June 29th. Inflation still appears to be a concern, so it's a lock that the Fed will increase rates by another .25%, and they may go further yet. And when the Fed hikes the Fed Funds Rate, it impacts many other lending rates, such as for Home Equity lines, credit cards, car loans, business loans...they've all been moving higher over the past two years of hikes, and it looks like the hits will keep on coming. It may be time to consider restructuring your outstanding debt, so please call me for ideas and strategies that may make sense as rates continue to climb. AND SPEAKING OF RATES INCREASING, THE DAYS OF SUPER LOW RATES ON STUDENT LOANS IS OFFICIALLY ENDING ON JULY 1ST. HOW CAN YOU KEEP EDUCATION AFFORDABLE FOR YOURSELF OR YOUR FAMILY? READ THIS WEEK'S MORTGAGE MARKET VIEW, AND PASS IT ON TO OTHER STUDENTS AND FAMILIES THAT HAVE COLLEGE EXPENSES AS WELL.

Forecast for the Week

There's plenty of juice in the week ahead — chock full of economic news and happenings, giving a nice broad look at the economy. New and Existing Home Sales data will provide a read on the housing market, Consumer Confidence and Sentiment will show how the "Average Joe" is feeling about the economy overall, Personal Income and Spending will show us how "Joe" is managing his own money based on those beliefs, and the important Fed meeting will bring another rate hike, as well as the Fed's opinion of how the economy is doing. As far as home loan rates go...the chart below shows how Mortgage Bond prices have been progressively worsening, which in turn means home loan rates have been rising. But you can see how they are now hitting a tough technical "floor" of support that may help them gain some ground higher and bring improvement to home loan rates. Because Bonds tend to rise in price when negative economic news hits, the heavy news week ahead will provide some opportunity for that to happen. And just like Fed Chair Bernanke loves to say lately, the Bond market will also be "data dependant", and may find improvement if the news and data turns up sour. Chart: Fannie Mae 6.5% Mortgage Bond (Friday Jun 23, 2006)

The Mortgage Market View...

"I BELIEVE THAT WE PARENTS MUST ENCOURAGE OUR CHILDREN TO BECOME EDUCATED...SO THEY CAN GET INTO A GOOD COLLEGE THAT WE CANNOT AFFORD." Dave Barry Unfortunately, it's true...it can be expensive to invest in higher education — tuition, books, living expenses — it all adds up fast. And the costs have escalated dramatically over the past few years, so it is no wonder that student loans are on the rise, as students and their families seek solutions to help foot the bill. And the dollar amounts of student loans aren't the only thing on the rise...effective July 1, 2006, interest rates on Stafford Loans for students and Plus loans for parents are scheduled to increase as well. With interest rates at low levels in the past few years, payments on student loans have been manageable for most. But rates on Stafford Loans for students will increase from 5.3% to 6.8%, and rates on PLUS loans for parents will increase from 6.1% to 8.5%. That could be tougher to handle than a pop quiz in calculus! Additionally, existing student loans with variable rates that are scheduled to reset will likely rise to current higher levels as well. This increase could have a significant impact on your family's wallet. But in today's competitive labor market, a college education continues to be important. So what to do? To avoid having payments that are difficult to manage, here are a few tips to look into right away. First, see if scholarships might be available — depending on grades, nationality or special interests; there may be grants or scholarship money available for the student, so check into websites like www.fastweb.com and www.scholarships.com. When borrowing to finance a college education, look into loans for the student first — As noted above, Stafford Loans for students will be cheaper than the PLUS loans for parents. Have the student borrow in their own name first and less expensively, as a parent can always contribute to the payment later if desired. Next, shop for Plus loans — Although the interest rates are higher than Stafford Loans, you do not need stellar credit to qualify and you can usually deduct up to $2,500 a year in interest without preparing an itemized deduction schedule on your taxes. Potential tax benefits should always be discussed with a tax professional, so if you would like a referral for a certified tax accountant, please contact me. Do your homework — Shop around for student loans. Search for lenders that do not charge origination fees, or offer a lower rate of interest if you agree to sign up for automatic payment deduction from your account. Given that July 1 is right around the corner, getting a few comparisons quickly could save you from a steep payment increase. Try a visit to www.finaid.org to use easy calculators that help you determine how much school will cost, how much you need to save, and how much aid you need. Another great source is www.ConsolidationComparison.com, which allows you to compare consolidation loan options. Simply enter your current student loan information, hit send, and you will receive a comparison. Additionally, you can use the built-in filters to sort, compare, choose your loan option, and apply on line. So if student loans are already a part of your life, taking a few simple steps can help protect you from the payment increases. And if you're still seeing college as a distant dream for your young children, you can see why it makes sense to start saving today. Many state sponsored 529 college savings plans are a terrific option, and easy to start. Give me a call, and I'd be happy to recommend a great financial planner to you that could help get a savings plan established right away, and put concerns over affording that college education to rest.

The Week's Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of June 26 – June 30 Date ET Economic Report For Estimate Actual Prior Impact

The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.

As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.