Improved Mortgage Rates – Should I Refinance?

Mortgage rates are at their best in over a year. Does that mean you should refinance?

There are a few different factors that you need to consider before making the decision to refinance.

Watch this week’s video to learn more.

 

Questions or comments? Please reach out at www.swansonhomeloans.com OR 503.488.1808.

I’d be happy to help! Thanks!

A short outlook for housing in 2019

Have you made it a goal to buy a home in 2019?  If so then knowing when to buy can offer real savings.  In this short video I explain why I think home buyers that take action at the beginning of the year will likely be better off than those who wait.

As explained in the video, many experts are predicting that home prices and interest rates will rise throughout the year.  Given that mortgage rates are currently at multi-month lows, I am encouraging those who want to buy a home to look sooner rather than later.

If you would like a no obligation review of your options please contact me today to get started.  Thanks!

 

Rate Update September 16, 2008

Rates are effectively unchanged this morning.

There is A LOT to talk about this morning as crisis in the financial markets persists. Here is a summary of the major stories we’re falling that are likely to impact the direction of mortgage rates:

→ AIG: The nation’s largest insurer is close to insolvency. Analysts are suggesting that the troubled insurer needs to raise $75 billion in fresh capital to stay afloat. The failure of this firm would be unprecedented because of it’s vast reach & volume of obligations. AIG operates in 130 countries and is a major player in the credit default & life insurance sector. AIG’s failure would likely cause a major disruption in the financial markets which could drag other firms down with it. Although rates may benefit from this news in the near term, in the long run this would be a disaster.

→ Federal Funds Rate: The Fed is scheduled to announce their interest rate policy decision this afternoon. Last week at this time there was a 0% chance that the Fed would alter rates. However, analysts now assume a cut of at least .25% and possibly even .50%. Remember that in and of itself the Fed cutting rates will not directly impact mortgage rates. However, what they say following their announcement can.

→ Consumer Price Index: Finally, the Labor Department released the monthly CPI report. The report came in line with expectations reflecting a 5.4% increase year-over-year. When stripping out volatile food and energy prices year-over-year inflation rose by 2.5%. Although these figures are relatively high compared to the past couple years the announcement did not surprise the markets.

Current Outlook: floating

Kudos to Barron’s part II

After reading and blogging about one article in Barron’s this weekend I came to another outstading one.  Here is a link.  Nice work Barron’s.

Among the points that I found interesting:

* If Fannie Mae [ticker: FNM] and Freddie Mac [FRE] stopped all of their activity — for a moment, forget about shutting them down and being insolvent — in order to sell off mortgages as normal loans without this guarantee, the interest rate would have to be around 9% or 10%.

* Q: What other negatives do you see?

A: Inflation risk down the line. [The federal government is] going to probably overstimulate and over support in an attempt to stem these deflationary forces. We are looking at a longer-term inflationary force that is pretty substantial. This has been my view for a long time. Interest rates went into a very long decline from the late ’70s and early ’80s until earlier this decade, when first we saw rates bottom out. Then rates went up a couple of times.

Basically, we are getting back down toward those low levels again. The multiyear bottom in interest rates that started around 2002 will probably last into 2009. Then we are going to see the inflationary aftermath of these government policies, and you might be surprised at how high interest rates go.

* Q: How much more pain are we going to feel in the housing market before things start to stabilize?

A: I think we are about half way through. There is high momentum in terms of home-price declines, so it is pretty clear they are going lower. It always looks a lot like the hills on a roller coaster. It starts out with a flattish period. Then it starts to go down, and then it really starts to drop, and we are clearly in that period. That period is going to be with us for about another year before it flattens out and bumps along in 2010.

The S&P/Case-Shiller Index is down a little more than 15% from its peak in 2006, and I’ve believed for some time that the index will have dropped 30% from its peak. That means some markets are going to drop by 50%. That includes Miami, Las Vegas and Phoenix, all of which were fueled by subprime lending. The foreclosure overhang is so big in those areas.

Gas prices expected to rise thanks to Ike

According to this article on CNN Money’s website gas prices are expected to climb back towards the $4/ gallon level.  Althugh there is still a lot of uncertainty about the extent of the damage to oil producing infastructure caused by Hurrican Ike it looks like gas prices will be increasing.  I’ll be filling up my tank today!

Keep in mind that higher energy prices can add inflationary pressure on the economy which is bad fro mortgage rates.

How The Stock Market Impacts Mortgage Rates

Although inflation expectations are the primary factor that influence the direction of mortgage rates on a day-to-day basis the stock market can also have an impact.

To understand how this relationship works it’s first important to understand how mortgage rates are determined.

Mortgage rates are entirely determined by the price of mortgage-backed bonds (MBS’s). MBS’s are bonds that are issued by Fannie Mae and Freddie Mac that are backed by the interest paid by mortgage holders. Like the stock market, there is an exchange where MBS’s are traded.

There is an inverse relationship between the price of MBS’s and mortgage rates. When the price of MBS’s increase mortgage rates drop and vice versa.

So, to understand how the stock market can influence mortgage rates we have to understand how they impact the price of bonds. Stocks and bonds compete for the same investment dollar.

In other words, an investor with money to invest has to make a decision to invest their money in either the stock market or in the bond market (it should be noted that there are other investment options, but these two classes are the primary vehicles for investment capital).

For an investor, stocks are generally thought to provide higher returns over time but also come with greater volatility.

Conversely, bonds tend to have lower returns over time but have less volatility. Because bonds tend to provide low volatility with modest returns, the bond market can often act as a “safe-haven” for investors who sell their stock positions.

Therefore, in general, when the stock market goes down it is a sign that investors are selling stocks and shifting their capital into bonds. This boosts bond prices and drives mortgage rates down.

Conversely, when the stock market rallies it is a sign that investors are selling bond positions in order to shift capital into the stock market. The greater supply of bonds on the market drives prices lower and pushes mortgage rates higher.

It’s important to understand that there are a myriad of factors that impact mortgage rates on a day-to-day basis.

Inflation expectations and technical trading patterns are two of the primary factors that we monitor. However, in the absence of new information on these two topics it’s not uncommon for mortgage rates to be impacted by the stock market in the aforementioned manner.