Rate Update September 12, 2008
Mortgage rates are unchanged from yesterday but we feel they will move higher in the next couple days.
Mortgage-backed bonds are currently selling off which is a sign mortgage rates will move higher in the coming hours and days.
However, we still feel optimistic that mortgage rates will move lower because a substantial spread sill exists between 30-year mortgage-backed bonds & 30-year treasuries.
Currently, 30-year treasuries yield around 4.24% while mortgage-backed bonds are yielding around 4.93%-5.29% depending on the issue. Since the government has essentially assumed the obligations of Fannie Mae & Freddie Mac (who guarantee the interest payments on mortgage backed bonds) the credit risk should be similar and therefore the yields should be similar. This means mortgage rates should come down or treasury yields should rise. We believe the former will take place with time.
As a reminder, if you haven’t yet read these two new blog postings they contain important information for real estate professionals.
Post #1- What the bailout means for you
Post #2- Mortgage guidelines continue to be tightened
Current Outlook: locking short-term/ floating long-term