THE BASIS POINT

WeeklyBasis 10/24/05: Bernanke Appointed to Succeed Greenspan

Rates are up about .125% since my last market report on October 10 (I was off last Monday). In the last report, I said rates may increase as we head toward the holidays, and this still holds. Energy prices are still high, and giving consumers less expendable income. As it gets colder, this price pressure will expand beyond gas stations and also show up in heating bills.

Rates rose slightly on the open today, after Ben Bernanke was appointed to succeed Alan Greenspan as Federal Reserve chairman. The reason rates rose was because some Wall Streeters think his inflation fighting tactics might mean even more aggressive rate hikes. But overall, Wall Street believes Bernanke is a good appointment because he’s most definitely an economist before he’s a partisan lap-dog for the Bush administration. And he’s been a member of the Federal Reserve board since 2002, working alongside Greenspan on rate policy. He’s already played an intimate role in the Fed’s current battle against inflation. So he’s not coming in blind. Also, Greenspan will still head the Fed until the end of January. By that time, the rate hike campaign could be over, or in it’s last phase. I predict two more .25% rate hikes from the Fed before then though.

As for this week, we’ve got consumer sentiment data on Tuesday and Friday. I expect flat or slightly upward rate movement.

Conforming ($200,000 – $359,650) – NO POINTS
30 Year: 6.0% (6.14% APR)
15 Year: 5.625% (5.765% APR)
5/1 ARM: 5.75% (5.85% APR)

Jumbo ($359,651 – $650,000) – NO POINTS
30 Year: 6.25% (6.39% APR)
15 Year: 5.875% (6.015% APR)
5/1 ARM: 5.875% (6.025% APR)