Your Pensacola Mortgage Authority
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.
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December 9, 2008 at 4:38 pm · Filed under The Mortgage Market
If you are not in the real estate business or you are not watching the news regularly, you are missing out on a great opportunity to refinance your mortgage to the lowest rates available in years. As of today (December 9th, 2008) 30 year fixed rates are quoted as low as 4.875%. That is not a mis-print.
That puts mortgage rates within .25% of the all time 40 year lows reached in June of 2003. No one should refinance just because it is the popular thing to do. But, rates are so good that depending on what your current rate is, you might be able to refinance to a 15 year fixed rate and end up with the same or similar payment. That is powerful!
Knocking 10 or 15 years off of your term will save 10’s of thousands of dollars over the life of the loan, and that savings could be going to fund your retirement instead of lining the mortgage companies pockets.
At the very least, you owe it to yourself to get a consultation to see if it is justifiable to refinance. As a rule, you want to refi if you are saving at least 1% on your rate. But, there is more to it than that. If you can lower your term and keep the same payment, or if the monthly savings offsets the cost of the refinance in 15 months or less, it is worth looking at.
If you would like to check under the hood of your mortgage, call me at 850-221-8334 or and I would be happy to discuss your options.
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November 26, 2008 at 3:46 pm · Filed under The Mortgage Market
Rates have dropped significantly for long term mortgage loans over the last 2 days. This was fueled by the announcement by the Treasury Department that they will buy $600 billion in mortgage backed securities. This news means that buyers of mortgage bonds have more security in their investment. That drives up the price of bonds, and drives down the mortgage rates.
At the same time, the durable goods report came out today much worse than expected which feeds into the recessionary environment and causing investors to buy bonds to protect capital. Also, personal incomes rose in October by .3% vs. the expected .1% which is an indication that even though some workers are being laid off, the remaining are working overtime. This could be an indication that the recession will not be as long as expected, although one indicator for one month is hardly a barometer for any long term prediction.
For current rates or to apply online, go to www.SteveRussellOnline.com.
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