A mid-year review

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At the time of this writing, mid-June rates are holding at a level that is lower than what I expected. The 30-year rate is currently at 4.125%-4.250%, the 20-year is at 3.875%-4.000%, the 15 year is 3.250%-3.375%, and the 10 year is at 3.000%-3.125%.

That is lower than when we started the year, when rates were.25%-.375% higher across the board. That’s surprising because the Federal Reserve has been tapering their bond purchases by $10 billion per month since the beginning of the year, that move was expected to drive rates higher.

Why do we think the opposite is taking place? There can be a few reasons. One reason is that many economists including the Fed have scaled back their estimations of what the GDP (Gross Domestic Product) will do. This is a total of all the gross receipts taken in by the domestic economy. A weaker economy is going to keep rates down.

Deflation is also another concern that is not talked about much, but it is on the minds of many. Deflation is also a concern in Europe, where earlier this month the European Central Bank President Mario Draghi made a historic move by charging banks to keep their money at the ECB. This is move by Draghi is aimed at pumping money into the European economy. This is a real concern because it signals that the ECB, like the Fed, does not have a lot of financial power to recharge the economy and is taking any measure within their mandate to do so.

I still believe that rates by year’s end will be above 5% based on the Fed’s ongoing tapering.. Where we end up will be dictated by how the economy performs.

For more, call 773-557-1000 ext. 15, e-mail ron@ronmortgage.com or visit www.ronmortgage.com.

About Ron Ricchio

Renato (Ron) Ricchio is president of Chicagoland Home Mortgage. He grew up in Westchester and attended St. Joseph High School and DePaul University, taking a job as a loan officer in the mortgage industry soon after graduating with a bachelor's in finance in 1991. He started his own company in 2001, which he operates today. He has been ranked in the top 150 loan originators in 2010 and 2011 by Origination News. Ron is happily married with three beautiful children. A board member of San Francesco Di Paola Society and the founder of Ricchio Family Toy Drive for Lurie's Children's Hospital, he enjoys cooking and spending time with family and friends.

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