Mortgage Rates Rise

June 11 (Bloomberg) -- Fixed U.S. mortgage rates rose to the highest since November, signaling that the Federal Reserve’s plan to lower borrowing cost is stalling.

The average 30-year rate jumped to 5.59 percent from 5.29 percent a week earlier, Freddie Mac, the McLean, Virginia-based mortgage buyer, said today in a statement. The 15-year rate averaged 5.06 percent.

Rising rates may deepen the U.S. housing slump by sidelining people who want to refinance or purchase a house. U.S. mortgage applications fell last week to the lowest since February and shares of the largest homebuilders have dropped 11 percent since May 1 on concern more expensive home loan payments will turn away prospective buyers.

“The economy doesn’t need higher mortgage rates because that will depress the level of home sales, cut off refinancing, and keep consumer spending sluggish,” said Patrick Newport, an economist with Lexington, Massachusetts-based IHS Global Insight.

The increase in rates announced today was the biggest weekly jump since October. Rates were last higher in the week ended Nov. 27, when they were 5.97 percent.

The Federal Reserve said March 18 it would purchase as much as $1.25 trillion in securities from mortgage-buyers Fannie Mae and Freddie Mac to help drive borrowing costs lower. Yields on Fannie Mae and Freddie Mac mortgage securities rose yesterday to a level not seen since the Fed announced its plan. The program helped push rates to a record low 4.78 percent twice in April.

Now rates are climbing along with Treasury yields on investor concern that a greater supply of government debt being sold to fund federal spending will fuel inflation.

Buying Program

The central bank’s purchases of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae initially brought down the yields on those securities, allowing lenders to reduce rates on new loans and still sell them at a profit.

The Fed has bought a net $507.1 billion of mortgage bonds so far, including $25.5 billion in the week ended May 27, according to Bloomberg data.

Rates are rising as home prices continue to drop and foreclosures rise. U.S. foreclosure filings surpassed 300,000 for the third straight month in May and may hit a record 1.8 million by the first half of the year, RealtyTrac Inc. said today.

A total of 321,480 properties received a default or auction notice or were repossessed last month, up 18 percent from a year earlier, the Irvine, California-based seller of default data said in a statement. One in 398 U.S. households received a filing last month.

Home prices in 20 major metropolitan areas fell more than forecast in March as defaults surged. The S&P/Case-Shiller home- price index decreased 18.7 percent from March 2008, matching the drop in the year ended in February. The measure declined 19 percent in January, the most since data began in 2001.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan dropped 7.2 percent to 611 in the week ended June 5. Purchase applications rose 1.1 percent while requests to refinance fell 12 percent.

10 Tips for a better Savings Account

1. Know where to investigate. Go to Bankrate.com and click on “Compare rates.” Select “Checking & Savings” as the product you want to check, then click on “MMAs/Savings Accounts,” then “Search by 100 Highest Yields.” Keep choosing MMAs and savings accounts as you click through, and you’ll arrive at a list of banks offering above-average yields.

2. Check the safety rating. Some banks offer unusually high yields because they’re trying to drum up business and increase deposits. To make sure you’re dealing with a financial institution that isn’t too shaky, check the “Safe & Sound” rating it’s been given by Bankrate.com.(You’ll also see “Safe & Sound” ratings in the form of a star system in the overall bank list mentioned in Tip No. 1. One star is the lowest rating; five stars means “superior.”)

3. Look for government-backed insurance. Opt for an institution that is insured by the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Share Insurance Fund (NCUSIF). That means up to $100,000 of the money you deposit will be insured by the federal government.

4. Understand how it works. Online banks and bank divisions save millions on operating expenses because they don’t have branches to maintain. They are able to pass that savings on to customers in the form of higher yields on deposits.

5. Don’t be duped. Online divisions of well-known banks should be federally insured, but it’s still a good idea to check. Some sneaky copycat sites look and feel similar to the sites of real banks, so examine the bank’s name carefully and make sure it’s legitimate, with headquarters based at a real, verifiable address.

6. Prepare to link up to your checking account. If you open an online savings or money market account, you won’t need to cancel or close your existing accounts at your current bank. In fact, the online entity most likely will want to link your new account to your existing checking account so you can transfer money back and forth with ease.

7. Don’t get too hung up on precise rates – unless they won’t last. You could spend a lot of time and energy hunting down an interest rate that is, say, 0.03 percent higher than another rate, but that won’t make a huge difference in your overall yield. Just try to get a big enough rate bump that you’re losing less money to inflation every year. Here’s one rate-related detail that really does matter, though: Make sure you’re not being seduced by a high teaser rate that will plummet in three months or so. The idea is to keep the higher yields rolling in month after month.

8. Examine the fees. Some online accounts require high minimum balances to avoid monthly fees. Be certain you’ll be able to deposit enough money – and keep enough money in your account – to avoid getting walloped. Also check to see whether you’ll be hit with fees when you make deposits at a brick-and-mortar bank branch or use an ATM card to withdraw cash.

9. Choose challenging passwords. When selecting passwords for your online accounts, avoid obvious ones such as your mother’s maiden name, your date of birth, the last four digits of your Social Security number or a series of consecutive numbers. Opt for a hard-to-guess combination of letters and numbers.

10. Be a savvy computer user. Update your virus protection software regularly, don’t download files or click on hyperlinks sent to you by people you don’t know, use a firewall program and use a secure browser for online transactions. Also, avoid storing financial information on your laptop. (Laptops are much too easy to steal.)

Should You Save for College or Retirement?

A senior financial advisor at Ameriprise says you should fund retirement accounts first

Choosing how much of your savings to spend on a child's education while also planning your own financial future is a challenge every parent faces. Evelyn Dinkins, a senior financial advisor for Ameriprise Financial, has a daughter in college, but is also saving for her own retirement. Dinkins recently spoke with U.S. News about why you should fund retirement accounts before paying the bursar. Excerpts:

debtinsider

How should you prioritize saving for your children's college education and funding your own retirement?

The prioritization is a very personal thing. Typically retirement comes first and education is a close second. There is only one way to save for retirement and that's for you to do it. There aren't many pensions left out there. Never leave 401(k) matching money on the table. That's free money. Fully save for retirement and if there is money left over, then save for education. There are a lot of ways to pay for education. There are loans. There are scholarships. There are grants. There are also so many ways students can keep costs down. Students can go in state and live at home. Too often we see people who haven't saved for education and use their retirement accounts. If you do that you may end up having to delay your retirement.

Are many parents able to completely fund their children's education while still keeping retirement plans on track?

A lot of times they can't fund the whole college experience and pay for retirement. They can only fund some amount of the college education. A lot of times their own experience has helped them decide how much college they want to fund. Sometimes parents come in with a very definite idea like, "I had to pay for college or my parents paid for me." We always start planning with the end in mind. Tell me what retirement is going to look like. Tell me what you want your child's college experience to be like.

Should you level with your child about the family's finances?

Have a discussion with the student when they are about 16 or 17. They should start looking at various schools and get a feel for all these costs. You don't want the student to have unrealistic expectations. At the age of 16 or 17 they are capable of understanding what it's going to cost and where it's going to come from and what the family's finances are. Even if you could afford to pay for everything, it's important for the student to understand how much college costs. My daughter looked at one particular school and I just had to say that can't be on your list unless you want to come out with a massive student loan. Unless the kid can get a scholarship, they often don't go to the expensive schools. Expensive schools do have large endowments and the average student doesn't even pay the full amount because they have so much money to give. You need to check with the school. Typically you can find out on their website what the average student is actually paying.

How does saving for college and retirement affect how much financial aid a student is eligible for?

Money that is set aside in retirement accounts is not considered money that is even available to go to a college education. 100 percent of that money is going towards your retirement. Don't put all of your savings into a 529 plan. The 529 plan is all for college and it can skew your financial aid. If you're counting on financial aid it may not be the best route.

How much do you need to save to finance four years of college and retirement?

You need to be saving probably 20 percent of your income for retirement if you are going to be saving well for retirement. Most people are saving 5 or 6 percent for retirement. College always costs more than you think it's going to cost. If it says the university costs $10,000 a year, assume it costs more than that because you are going to be spending more money. You're going to need to have auto insurance, additional food, and what if they don't want to live in the dorm? It's going to end up costing more. You can find out what it costs and then I think you should add another 10 to 20 percent over what you think it is going to cost.

Get Coupons off ebay

Yeah, yeah, another article about coupons. But really, this one is unique! I recently ran across an article on buying coupons through eBay. I had no idea this kind of thing went on, but why not? There aren’t many things that can’t be bought or sold on eBay and I had some fun checking out the ebay coupon market for myself.

eBay can be a great source for multiple and/or high-value coupons if you know what to look for. The “cost” of the auction is for compensating the clipper for their time clipping, for one can’t really buy a coupon - they are offered for free by grocery stores or manufacturers. Here are some tips the article suggests in finding the best clipper for my money, along with some of my own:

1. Be as specific in your search as possible. I entered the search terms “Coffee coupons” into ebay and received the following listings as results: Coupons for free Starbucks drinks and $2 off on “buy 2 bags of a particular brand of coffee”. This may not help you if you are only looking to save on a particular coffee brand purchased at grocery stores. Adding more terms like “Folgers” to your initial search of “Coffee Coupons” may help refine your search.
2. Shipping should always be the cost of a first class stamp (or less!) Many eBayers make their money off of shipping charges, so don’t get caught up in this trap. I mean, how much do those coupons actually weigh?
3. Don’t pay for what you don’t want. Since many people sell packages of coupons, you won’t be able to totally avoid receiving coupons that you might not be interested in. Bid only on the value of the coupons you want within a coupon package. For instance, if you want diaper coupons, bid what you think the diaper coupons alone are worth in a package of coupons. The rest is gravy.
4. Don’t buy internet-printed coupons you could find on your own. This one is pretty obvious, right? Check out the most common internet coupon sites and see what you can get for free before laying down cash for the same coupons.
5. Know what you are bidding on! I did a general search on “grocery store coupons” and looked at some of the results. In some cases, the listings did not even include a description of the type of coupons or even the types of products, just the expiration dates.
6. Watch Out for Coupon Clipping Services Many of the results I received back in my search results for “Coffee Coupons”, were not actual coupons, but people offering to look out for and clip coupons for you and send them to you. I would be a little leery of these listings.
7. Pay attention to expiration dates. This one should be obvious, but in your “excitement” (ok, that may be too strong a word) you might forget. We’re just providing you with a complete checklist.
8. Do the math to see if purchasing a coupon makes sense. This one is also kinda obvious, if a coupon is only worth a dollar discount at the store, don’t pay 99 cents plus shipping on it. You’re going to lose money. Read as much of the fine print on a coupon as you can. Do you need to buy 2 of something to get a discount?