Interest Rates Are Up?!?
Friday, January 30, 2009
There is an old saying that the market (in this case the bond market) makes a fool of the largest number of people. That came true again yesterday in mortgage bond trading. Thursday morning, rates on a 30 year fixed rate loan were at 5.25%. Today they are for the most part around 5.75%. This made fools of everyone who "knew" interest rates on mortgages were going to fall to 4.5%.
So what happened and is it permanent? The answer is that mortgage bonds got caught in a vortex. First, they have been on a huge run since around Thanksgiving and since rates never go up or down in a straight line a little sell off is not surprising. Additionally, the stimulus package that the new administration was touting before the inauguration was short on details but long on commitments to infrastructure and direct stimulation of the economy. Now the package is more expensive and appears to have more pork (read: non stimulus spending) in it. This combination is inflationary and bonds hate inflation. The final straw is that mortgage lenders are overrun with business. I receive emails from underwriters with questions at all hours of the day, midnight, 5AM, 8PM. They are working around the clock and not hiring additional people to help since they laid them all off a few months ago. This is causing lenders to raise rates to catch up on workflow. The combination has turned the falling rate momentum into rising momentum.
So will it last? The short answer is I don't think so. Rising rates are associated with rising inflation, which in the big picture, is associated with an expanding economy. The 4th quarter 2008 GDP number was just reported at -3.8%. There does not seem to be an improving economy on the horizon. Thousands of layoffs were announced and executed this week. Do you know anyone, aside from bankruptcy attorneys, doing well today?
The best advice now is to find a target and stick to it. Your mortgage professional can run the numbers for you and show you where a really good rate makes sense for you. Then get your application in and wait for the market to return. Once, that rate hits LOCK IT IN. Don't let the greed to get a great rate get in the way of getting a good rate that can save you tens of thousands of dollars over the life of your mortgage.
Labels: mortgage truths
posted by Dylan Kramer @ 9:35 AM,
Inauguration and Fed Meeting
Thursday, January 22, 2009
Like most people, I found myself blown away by the inauguration. I was amazed by several things.
1. Technology allowed our entire team here at America's Mortgage Choice to watch it on the web, live and uninterrupted. We don't even have a TV here. The internet has put everyone on the same "information page"
2. The amount of people that attended in person was hard to comprehend, even as I looked at it live. I have a high school friend that was up close and posted experience to his facebook page. Amazing how we were able to feel a part of it. (special thanks to Tim King)
3. Agree or disagree with President Obama politically or philosophically, I am impressed with his ability to get everyone "on board". Most Americans want him to succeed which is an achievement itself.
So how does this relate to mortgages and the real estate market?
In every way possible. It's time to get to work on solving the problems we have and deadlines are approaching.
The first is the Fed meeting on January 27 and 28. Around 1:15 CST on the 28th, the Fed will tell us their next move regarding interest rates. Please keep in mind that the current Fed Funds Rate between ZERO and .25%. There is not much room to cut further.
However, they will make a policy statement that may impact mortgage rates. The mortgage backed security market (where rates are set, not the 10 year US Treasury bond) is nervous right now because with the uncertainty of action to be taken by the Obama administration. Several economic fronts (foreclosure, housing prices, employment, taxes) need to be addressed and as long as there is uncertainty in the market rates are likely to rise a bit as they have over the last week.
In fact, if you have been considering refinancing your home, run the numbers now. If they make sense, do it. Trying to guess the bottom is a tough game to play. Don't be the client who keeps paying a 6.875% mortgage because though you can get 5.5% today, you want 5.25% or 5.125%. Don’t laugh, I have one customer waiting since 2003 for 4.5% on a 30 year fixed. He is still paying 6.875%.
The Fed Meeting may not result in any change whatsoever. Most don't. However, if you lose the chance to save tens of thousands of dollars over your lifetime because you did not pick up the phone this week, you will kick yourself. In today's economy savings via refinancing can help you have a mortgage free retirement and help you meet any number of financial goals you may have.
For a quick review of your mortgage situation, contact us today or download this form and fax it into 630-368-1688.
posted by Dylan Kramer @ 7:22 AM,
Critical Alert: New Fannie Mae Adjustments
Tuesday, January 13, 2009
New Fannie Mae price adjustments will go into effect on 1/15/2009!
These adjustments will affect most homeowners looking to refinance. If you are even considering refinancing to take advantage of today's lower rates, it is imperative that you call your America's Mortgage Choice loan officer TODAY before these changes go into effect!
Labels: current market
posted by Dylan Kramer @ 9:07 AM,