Archive for June, 2009

A new hope for historically low rates

June 25, 2009

Here at A Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile, the market is constantly watched to see not only the current trend in rates, but also where rates are headed over the next several days.

If you’ve read the news lately, you know that interest rates are not what they used to be.  Rates climbed to as high as 6%, but have slowly and surely worked their way down over the past couple of weeks.  Then the big news of the day… the 200 day moving average has been broken and rates are moving lower.  Why is this good news?

– Frequent readers know that I love mortgage backed security (MBS) bonds.  Why?  Their values determine interest rates.  As MBS Bond prices rise, interest rates fall (and vice-versa).

– Frequent readers also know that I am somewhat obsessed with the 200 day moving average because it acts as a strong level of resistance OR a strong level of support – depending on which side MBS bond prices sit.

– If bond prices are below the 200 day moving average, it becomes difficult for interest rates to continue to improve.  If bond prices rest above the 200 day moving average, it becomes difficult for interest rates to worsen.

Before today’s market movements, bond prices were below the 200 day moving average and that line acted as a resistance to rates continuing to improve. Rates were resting around 5.25-5.375% and not moving lower.

Now that bond prices have passed the 200 day moving average, 5.25% becomes the new “high” end of rates.  In fact as I finish up this post, lenders are releasing improved rate sheets.  For those of you waiting for anything at or below 5%, a new hope emerged.

a new hope

insert obligatory "star wars" reference here

What does this mean for you?

– If you are looking to refinance, give me a call now so you are in a position to take advantage of low rates when they arrive.

– If you are buying a home, let’s talk about a “lock and shop” feature where you can lock your interest rate while you look for a home.  Even better, once you find a home, you would also be eligible for a one time FREE float down on the rate if the market has improved.

As I’ve said many times, planning ahead is crucial.  Let’s touch base now and be ready to act while interest rates are near historical lows.

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services 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 Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.
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Higher rates? OK, now what?

June 3, 2009
By now we all know rates are higher than they have been in quite some time.  Some lenders have rates for 30 year fixed mortgages above 5.5%.  Seems funny since rates were very recently hovering around 4.75%.  See yesterday’s post for information on “why” this happened.
 
Based on my post from Tuesday, here are some questions you might be thinking:
  • So are we on the verge of a full economic recovery? No, not on the verge. 
  • OK then, then a full recover must be just around the corner, right?  Maybe, but not necessarily.
  • So… what was the ‘good news’ that caused everyone to get trigger happy on selling bonds and pushing interest rates higher?  I’m glad you asked!
 
The ‘good news’ wasn’t really ‘good news’ but actually ‘not as bad as we thought news.’ The market reacted positively with the release of the Jobs Report Wednesday morning that showed initial jobless claims came in slightly under expectations — only 623,000 jobs were lost when the market expected the number to be around 636,000. 
 
It is ‘good news’ when the market beats expectation, but it seems everyone ignored the fact that over 600,000 people still lost their jobs last month!?!
 
It seems the total recovery may not be as close as some hoped last week, which actually bodes well for interest rates.  Moving forward, the environment is still favorable for low rates due to: 
  • The Feds and the Treasury’s continued motivation to keep rates low by purchasing Mortgage Backed Security Bonds.  The White House’s “Home Affordable” Program will be severely slowed down if mortgage rates remain above 5%.  To continue to assist the housing recovery, economic recovery, and keep all parties involved looking good in the eye of the public, expect the Feds and the Treasury to step up their efforts.
  • Rates for a 30 year fixed mortgage have consistently stayed in the 4.625% to 4.875% range.  Lenders have demonstrated a willingness to loan money at this rate, but not much lower than that level.  Meaning, there is a precedent for interest rates being that low and they could move back into that range.
Based on the fact that rates will probably recover some (if not all) of their losses over the next several weeks/months, my advice is simply “be ready.”
  • Now is the time to get prequalified and start looking for your new home.  Finding a home could take several weeks, and rates may have moved lower by that point.
  • If you are looking to refinance, get the process started and wait for a target rate… 4.625%, 4.75%, 4.875%, or 5.0% and be prepared to lock-in as soon as it is available.

Interest rates have take a dramatic turn north, but all is not lost.  Planning ahead and getting the ball rolling on a purchase/refi will put you in a great position to take advantage of improving interest rates. 

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services 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 Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.

Right about “when”; wrong about “why”

June 2, 2009

Previous posts (here, here, and here) discussed the inevitable possibility of interest rates moving higher around the end of May/early June of this year. 

Why did I feel this would happen? 

The Federal Reserve began a campaign that purchased Mortgage Backed Security Bonds. This action pushed bond prices higher while forcing interest rates lower.  The plan was scheduled to end June 30th.  Since market movements predicate on what could happen as much as what does happen, the feeling was rates would move higher once we were around 30 days of the program ending. 

Those reasons for the potential rate increase were ruined once the Feds announced an extension of the plan through 2009.  Sadly though, rates still climed at the very end of May.

On Wednesday, May 27, 2009, interest rates increased roughly a half a point in one day!?! What exactly happened?

The past couple of months saw interest rates trading in a range of 4.625% to 4.875%.  When rates moved to 4.625%, they would start to slightly increase, and vice-versa.  When the market opened Wednesday morning, rates were on the high end of that trading cycle; meaning, the trend showed they were moving in the wrong direction.

Then supply-and-demand took hold. There was an over-supply of bonds in the market Wednesday due to a new 2-year treasury auction.  Couple that with a positive economic outlook for the rest of 2009, and you have a recipe for disaster.

In the end, it seems my prediction on when rates would go up was right.  Most of the time, it’s better to be half right rather than being completely wrong.  In this case, I would rather have been wrong about both the when and the why.   Higher rates aren’t good for anyone at the present moment.

Coming soon… Higher rates? OK, now what?… thoughts on what to do as we move forward.

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services 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 Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.