Tag: mortgage rates

Rate Update July 6, 2009

Posted on by Evan in Rate Update

Mortgage rates are essentially unchanged this morning despite an economic storyline that would typically help rates move lower.

Equity markets around the world traded lower today as investors pull back on stocks ahead of earnings season which kicks off on Wednesday.  The US Dollar is trading higher against foreign currencies and oil prices are lower.  This inflation-easing news has yet to help mortgage rates because of technical trading patterns.

We’ll keep a close eye on the market over the next couple days to see if bond prices can break through the 50-day moving average.  If they can, expect lower mortgage rates later in the week.  However, we’re taking a risk because it’s also very possible for bond prices to bounce lower here which would push rates higher.

Current Outlook: Cautiously floating

Rate Update July 2, 2009

Posted on by Evan in Rate Update

In yesterday’s ‘rate update’ we recommended floating rates into today’s jobs report and fortunately our advice paid off. Both fixed rates and ARMs are down significantly this morning. FHA rates remain unchanged.

Analysts’ expectations were for 363,000 jobs lost last month. The report issued this morning showed that the economy lost over 100,000 more than this. The unemployment rate in the US now stands at 9.5%, the highest level since 1983.

Bad news for the economy is typically good news for mortgage rates and we’re seeing that this morning. For a more complete explanation on how the monthly jobs report impacts mortgage rates please refer to this link.

For now, technical trading patterns do not look favorable for interest rates. We are going to continue to float to see if rates can push lower but we need to be cautious because in today’s markets volatility can erase gains quickly.

Current Outlook: Cautiously floating

Dan Green explains why mortgage rates rise after Fed cut

Posted on by Evan in Economics & Interest Rates

Dan Green of The Mortgage Reports Blog posted this article today in which he explains the economic theory as to why mortgage rates often rise following a Fed rate cut.

Here are a few outtakes:

*The Federal Open Market Committee adjourns from its two-day meeting this afternoon.  The voting members are widely expected to lower the Fed Funds Rate by a half-percent to 0.500 percent, the lowest Fed Funds Rate in recorded history. Mortgage rates should rise in response.

*The Fed Funds Rate is an interest rate usually reserved for loans between banks, made at the close of the business one day and repaid at the start of business the next day.  This is why the Fed Funds Rate is often called an “overnight rate”  — the money is literally borrowed overnight.  By contrast, mortgage money is typically lent for 30 years — 10,957 overnight rates strung together.  It’s a completely different risk class for banks.

*That said, the Fed Funds Rate does have an indirect impact on mortgage rates because cuts to the Fed Funds Rate are meant to spur business and consumer spending, propelling the economy forward.  Mortgage rates come into play because there’s always the danger that the economy gets propelled too far forward and headlong into inflation.  We call this the Fool in the Shower Theory.  It says that the Fed is like a guy starting up the shower and turning the knob all the way to “H”.  Once the water heats up, as we’ve all experienced, it heats up quickly and the guy gets burned.  So, if Wall Street thinks the Fed is over-heating the economy long-term with its rate cuts today, expect mortgage rates should increase over the next 3 days.  This is what’s happened after each of the last 10 rate cuts.

Thanks Dan.

Fixed rates @ 4.5%????? Hold your horses, not yet

Posted on by Evan in General Mortgage Info., Rate Update

The US Treasury Department caught a lot of peoples’ attention yesterday when it announced it was working on a plan that would “encourage” banks to lend 30 year fixed rate mortgages as low as 4.50%.  I’d like to personally thank Hank Paulson for the free advertising.  Since that announcement many past clients have inquired with me about reviewing their mortgages.  However, there appear to be a few strings attached.  Here are some notes from the Wall Street Journal article on the subject:

*The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%.

*The plan remains in discussion and may not be made final before the Bush administration’s term ends in January.

*The lower interest rates would be available only to borrowers who are buying a home, not those refinancing a mortgage.

*Borrowers would have to qualify for a mortgage guaranteed by Fannie, Freddie or the Federal Housing Administration. Those guarantees apply to loans where borrowers can document their income and afford their monthly payments, steering the government away from backing loans considered risky.

No Closing Cost refinance

Posted on by Evan in General Mortgage Info.

With rates dipping I thought it appropriate to re-post the no closing cost refinance post.  Here is a link to read more.

If you would like us to provide a free refinance analysis don’t hesitate to contact us.

Deflation post #3

Posted on by Evan in Economics & Interest Rates

This weekend The Economist magazine published this article about developed economies and the likelihood that they will experience deflation in the next few months.

The article explains how deflationary pressures would be initiated because of falling commodity prices (known as “commodity-led deflation”).  The article goes on to explain how deflation can lead to further deflationary pressure.  How?

As deflation takes hold in the economy consumers who carry large debt burdens are faced with relatively more expensive obligations.  As this happens they are less likely to buy goods and services dampening demand and putting further pressure on prices to move lower.

I originally discussed deflation and the impact it should have in lowering mortgage rates in this post back on November 2nd.  We would expect mortgage rates to decrease as deflation becomes reality.

Rate Update November 10, 2008

Posted on by Evan in Rate Update

Mortgage rates are modestly higher this morning.

Mortgage-backed bond prices continue to walk a tight rope along the 200-day moving average.  This important level of technical support/ resistance is what we’ll have our eye on over the course of the next few days.

If mortgage-backed bond prices can manage to remain above this level then we’ll continue to advise a floating position.  However, if prices break below this level then we’d immediately shift our outlook to a locking stance.

There is a lot to talk about this morning in terms of financial headlines (warning: the news is grim):

* Over the weekend China announced that it would invest $586 billion into their infrastructure as a way to stimulate the economy.  This cause overseas stock markets to rally which could hurt mortgage rates.

* This morning AIG, the nation’s largest insurer, announced an operating loss of $24.7 billion for the 3rd quarter.  In response, the Federal government announced an increase to the lifeline it had proposed for the company worth $150 billion (up from $123 billion).  Bad news for the economy can often be good news for mortgage rates but in this case it’s costing the Federal government huge amounts of money which could put pressure on the US dollar.  A weak US Dollar is bad for mortgage rates.

* Lastly, on Friday General Motors (GM) announced that it was quickly running out of cash and would likely run out by the end of the year if nothing changed.  Much like the housing industry the auto industry benefited from easy financing over the past few years.  Today demand for new cars is off 35% and the auto firms are suffering.  Should GM fail the impact on the housing market would likely be felt nationwide.

Current outlook: watching the 200-day moving average- locking bias

Deflation string-article #2

Posted on by Evan in Economics & Interest Rates

This past Sunday I blogged about Nouriel Roubini’s prediction that the US economy would face deflation in the next 6 months.

Today, cnnmomney.com has also published this article in which they report that deflation is becoming more and more of a concern for central bankers.

In terms of economic health deflation is a bad sign.  In terms of mortgage rates the expectation of deflation could help mortgage rates get very low.  That’s why I am hoping that expectations for deflation grow so rates can move lower but that we never actually reach that point.

Deflationary environment would lower mortgage rates

Posted on by Evan in Economics & Interest Rates

You’ve probably never heard of Nouriel Roubini but you may want to start paying attention.  Along with Peter Schiff he basically called the subprime mortgage crisis before the term even existed.  He is getting a lot of attention lately in the media.

In this article published on Forbes.com he lays down the argument that the US economy will experience deflation in the next 6 months.  Although there are many scary macro-economic implications of such an event there is a silver lining for mortgage rates.

Since we know that higher inflation causes mortgage rates to increase, it can also be said that deflation causes mortgage rates to decrease.  In fact, much of the credit for low interest rates following 9/11 has been appointed to concerns of deflation.

Mortgage rates should benefit from Bernanke’s comments

Posted on by Evan in Economics & Interest Rates, The Fed

On Friday Fed Chairman Ben Bernanke announced that he endorses the concept of the federal government guarantying mortgage-backed securities (MBS’s) issued by Fannie Mae and Freddie Mac.  These comments should help mortgage rates move lower.

The reason that a government guarantee helps mortgage rates move lower is because it reduces the risk of default on MBS’s for investors and therefore they are willing to accept a lower yield.

To learn more click these links-

Washington Post article

Wall Street Journal article

Blog posting on the role that Fannie & Freddie play in mortgage market