A theme for lower interest rates

Themes are everywhere.  For instance, an overweight, elderly man in a red suite is associated with Christmas.  An over sized-orange fruit is synonymous with Halloween.  An elephant represents Republicans while a Donkey represents Democrats.  A bull and bear go hand-in-hand with the stock market.

With that in mind, what would be a good theme for lower interest rates?  The previously mentioned bull and bear could be a natural fit, but are associated with stocks.  With interest rates being determined by  mortgage-backed security bonds, it really isn’t the same thing.  Maybe bonds could brand their own livestock and forest animal… a sheep and a wolverine, or maybe a goat and a fox… I digress.

Why am I trying to find a theme?  Interest rates are moving lower and the 200 day moving average may help rates stay lower.  Previous posts discuss the fact that mortgage rates trade in ranges.  The 200 day moving average is a major tipping point on rate trading ranges.  Take a look at the chart below.

The price of bonds moved below the 200 day moving average back in June. At that time, interest rates were in the 5’s and then increased into the 6’s.  Around mid July, bonds tried to move past the 200 day average again, but were soundly rejected and rates stayed in the 6’s.  Seven weeks later, bond prices are trying to move past the 200 day moving average yet again.

Will bonds succeed?  Probably.  The government took over Fannie and Freddie making buying their bonds much more attractive.  The economy is slow, jobless claims are up, and a poor Jobs Report is expected tomorrow (Friday).  Bad economic news means good news for bond prices, which great news for mortgage rates as they get lower.

Why is the 200 day moving average so important?  Staying above the average would signal a new trading range for mortgage rates.  Instead of rates ranging from the low to mid 6%, rates would be back into the 5’s for a 30 year fixed loan.  We’ll have to see if bond prices can hold that line, but the chances of it holding now are much better than they were in mid July.

Back to the improving rates theme… still haven’t come up with a great theme.  Maybe I can be lazy about it and just use some people dancing like idiots.  You see this all the time on the internet for lending companies advertising rates. Who knew a dancing fool would equate with lower interest rates.  Then again, who could have imagined a large rodent would signal the beginning of Spring or a continuation of Winter.

alright, rates must be getting lower!

Clay Jeffreys is a Mortgage Consultant with Hillside Lending, LLC and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.” Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing. For more information about available programs and interest rates, please visit www.hillsidelending.com.