Your Pensacola Mortgage Authority
Archive for Mortgage Rate Forecast
February 4, 2009 at 4:38 pm · Filed under Mortgage Rate Forecast, Uncategorized
No matter how low rates are, people always want more. Whether rates are at 6% and you want 5.75% or in today’s market where they are at historic lows, and some still hold out for it to go even lower. Because I hear so much about the phantom 4.5% rate that is coming from the government, I thought I would put together some numbers that actually show the cost of waiting for that program to show up (assuming that it will at all).
If you have a mortgage of $250,000 and a rate of 6.5%, your monthly payment would be $1580. With a rate like that you are no doubt looking to refinance into a much lower rate that is available today. At 5%, your new payment would be $1342 (a monthly savings of $238). For most people, that is a very noticeable savings.
So what about 4.5%? Your new payment would be $1266 which is a savings of $314 over your current loan, and $76 better than the option today. But how long do you have to wait to see that rate?
The latest trend data in the bond market leads me to believe that we are in fact trending upward on mortgage rates. This is based on a number of factors, but most noteably, the new reports available about the FED’s program to buy back mortgage backed securities. It turns out that the FED is actually buying back the higher coupon rate mortgage bonds, not the ones that today’s rates are based on. This means that the bonds being purchased by the FED are actually the ones backed by current mortgages in the 6% to 6.5% range (the very ones that consumers are rushing to refinance).
This will not drive down rates further, but instead will help serve as a ceiling to keep them from moving back into the 6% range for a while. Based on this information, waiting around for rates to go lower may actually push you out of the market all together.
For more on this, check out the history of mortgage rates over the last 6 months.
If you like this, please share:
December 16, 2008 at 10:32 am · Filed under Mortgage Rate Forecast
Today at 2:15 EST the FED will release the decision from its December meeting. A drop in the Federal Funds Rate from 1% to .50% is expected, but they could drop it to .25%. As you continue to see news about this historic rate drop, it is important to remember that the Federal Funds Rate and Mortgage Rates are not directly tied to each other. In fact, the immediate response for mortgage rates is often negative after a rate drop from the FED.
At the time of this post, mortgage bonds are trading slightly higher, but relatively flat. This is likely being held in check by the FED decision due out this afternoon. Based on economic news out today, mortgage bonds would normally be trading sharply higher.
Consumer prices fell by the highest number on record, and it is the second month in a row that they have fallen significantly. Housing starts are down by the lowest level since recording of the informatiion began in 1959.
All this information is the equivalent of shaking up a champaign bottle, and the results of the FED meeting is the cork. Brace yourself for volililty in the market this afternoon. If you have a mortgage loan in process, be prepared to lock your rate if things heat up.
If you like this, please share:
December 15, 2008 at 2:51 pm · Filed under Mortgage Rate Forecast
Today’s mortgage bond market is moving relatively flat awaiting news from the FED’s meeting this week. The Federal Funds Rate currently sits at 1% (the prime rate, currently at 4%, is always 3% above the Federal Funds Rate), and analysts predict that a .50% drop is virtually a lock with a 70% chance that the drop may actually be .75%.
This means that the rate on your equity line of credit, and your credit cards that are tied to the prime rate will likely be going down this week. Before you jump for joy that mortgage rates are going even lower, remember that mortgage rates are based on the sale of mortgage bonds and mortgage backed securities, not the Federal Funds Rate. In fact, most projected Federal Funds Rate cuts are already priced into the market by the time they are made public, so the immediate reaction for mortgage rates is often negative.
Adding some pressure to the mortgage bond market is the newly discovered Bernie Madoff “Ponzi Scheme”. A Ponzi Scheme is an investment vehicle where the first investors are given an artificially high rate of return based on proceeds recieved from new investors (similar to a pyramid scheme). There is nothing new about ponzi schemes, but what is alarming is the number of people involved with this one, and the number of “savvy investors” with large holdings that were involved.
Because some hedge funds and institutional investors were involved, this could actually have an effect on the mortgage bond market as many will be forced to liquidate other assets (such as mortgage bonds and mortgage backed securities) to help cover the losses received through this “scheme”.
All this combined with the SEC making a decision on Mark To Market accounting in the coming weeks should add significant volitility to the markets going forward. Watch mortgage rates closely as they could change wildly and with little notice.
If you like this, please share:
