Last Thursday, President Obama proposed a $447 billion job stimulus plan, which was larger and broader than most had expected. The program calls for tax cuts, state aid, infrastructure spending, on-the-job training, plus tax cuts for small businesses to encourage hiring and a “Helping More Americans Refinance Mortgages,” or HARP plan. There are no details to the HARP plan as of yet, as the President simply instructed his team to work with Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA) and lenders to develop the plan.
So what could all of this mean for home loan rates? If President Obama’s plan helps stimulate the economy, it would have a negative effect on bonds and home loan rates long term as strong economic news usually causes investors to pull money out of bonds and into stocks. However, in the short term, bonds—including mortgage bonds, which home loan rates are tied to—are benefitting from the continued credit crisis in Europe, as investors see U.S. bonds as a safe haven for their money.
As you can see in the chart below, bonds and home loan rates were able to end the week above an important technical level due to continued problems in Europe.
By Guest Author Hamid S. Gul – Mortgage Home Officer with Bank of America Home Loans.
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