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Mortgage Rates Drop - but can they grow legs and gain momentum?

It was really an amazing day that saw one of the biggest single day rate drops i have witnessed in a long, long time. At the very end of the day investors issued a change for the worse but regardless, it was a breakthrough day.

I am currently hearing two schools of thought regarding the short term future of mortgage rates. Many say a rate correction is simply days away and this was all nothing but media hype.

Others believe mortgage rates can grow legs and keep falling.

I am now certain of one thing. When consumers refinance their house and mortgage business limps out of it's coma and shows some signs of life, any signs of life - well, it is a beautiful thing. If the governments intention was to spur on mortgage activity they are off to a great start but the momentum must build in order to sustain. Give me a refinance boom to shock the economy our of the great depression it is in and you must throw the word genius around.

Let this rate drop become nothing but media hype and we could see consumers and business retreat back inside their shell for a long winter...... But as of today there is hope. This is just what the Dr. ordered.

Maryland Mortgage Expert

Posted by Lewis Poretz - - Maryland Mortgage Expert - on 09/09/2008 09:33 AM

Comments (30)

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30 Comments on Mortgage Rates Drop - but can they grow legs and gain momentum?

SEP

2008

i certainly think it can grow legs. I hope it creates the momentum into the Winter months. We need it get some buyers off the fence and make decision again. Nothing like low rates to do this!!

Lewis,

I know just how you feel, every part of me wanted to lock in everyone but the other part said what if they go lower. How much are you willing to risk, if they can go down that quickly they can go up that fast. I wish I knew what market we are in and be able to tell the future, I hope the market grows legs...our housing needs something to kick start things.

I hope it is what we need... and it's not just media hype. I'd just had a lender tell me to expect them to go higher and they fell again today... huge.

In fact at this rate... I might refi.

The rate decline may be the spark we need to pull though, but we also need some consumer confidence in the stability of the investment. Great post!

Brian - we need it... we all need it...

Catherine - I tried to lock everyone today..... rates were that good!

Lane - I told clients rates would go up - i still think a major correction is around the corner

Ryan - STABILITY - that is a great word.... if rates retreat this has done nothing for anyone

Thanks for the hope...Lucille

Lewis.... good post, but I hate to be negative... as I read the numbers for the next week, I see rates going back up. Do you remember this same thing happened about 2 months ago. We gained a lot of ground in 3 days and then poof... it shot back up, and the continued to climb for 2 to 3 weeks. I think it will happen again, from some of the market data that is out there. Just my .02 for now. thanks

Jeff Belonger

Big rate drops would help move some people along at this time of year for sure.

I for one in Canada is hoping things turn for the US housing market and am cautiously watching to see if this is the first step. Which direction will step be in though? Although we have experienced little effect of the sub prime crisis we could do with out the media hype.

That and I only wish the best for those of you toughing it out throughout the lows. The highs will come again.

Jeff - I thought a few months back double digit interest rates could be a reality - i don't get it but i like it.....

Chuck - yes - it sure would help and we all need help...

Kye - the highs will come.... if low rates continue, thegovernment will be regarded as genius!

Lewis - For me, two things stick out. We have the perception/speculation of safety for the moment... which eases a very speculatory market. I hate that crap, but it seems to be reality. Rates drop and confidence grows. The other thing is that the market has sustained historically low rates for so very long, it's hard to continue such to have it correct itself. Wait... my mistake, Big Bro got involved. In my mind, the same mentality needs to imply. Keep rates low short-term, raise them by at least a 1.5% on a slow but sure monthly basis. At election time, rates won't be much higher. After the election, they'll show the growth that is needed to help control the disease that has been ongoing. Subprime lost because they were way too cheap. FHA may lose because of the very players involved. Conventional lending doesn't make a lick of common sense right now. Other than that, I really do see positive things in the future. It won't be for six months or so, but common sense lending will come back... in the very form of the very thing that caused all this... greed. Let's just hope, this time, greed is the good kind. The kind of greed that helps the people and not the policies and politics of anything else.

Jason - I am not sure I agree with everything you posted but you sure always make it sound so damn good. Thanks for the comments as usual.

SEP

2008

Lewis, when there are purchaser standing in lines to buy jumbo mortgages, the end is on us. Right now, correction or not, it is certainly helpful to have positive news out there.

Lewis,

and you present that positive news so well! I'm in your camp here buddy. Although we all know how bad the Fed's can muck things up it looks like the right call so far. Markets are applauding the takeover news, and rates have again fallen into the 5's. Will it serve to carry the GNMA rates down as well? I haven't seen FHA and RD rates react as strongly as conventional but momentum can be a beautiful thing.

Sardi man, got to depart from you this time. I'll stick to the textbook and it says in a market like this you don't raise rates. Consumer spending is down, it's a fact now. That will serve to cool down inflationary pressures better than any rate hike could. Now will we see the recovery in time to react before things get overheated?... we're getting way ahead of ourselves. Let's just get out of this funk first.

and it looks like the end may be coming in sight over the next hill...

Gerry Suarez, Jr.

Your HUD Loan Pro!

Hi Lewis: From what I've been reading, with the government guaranteeing more loans now with the Fannie/Freddy bailout, it means lenders are more comfortable easing rates as there's now a home for their loan. I'm not sure there will be a huge blip as there are other underlying problems (think huge bank losses) but it gets us excited and we tend to contact our customers which leads to more business! Good luck to you.

Paul

Well so far our bonds are doing well.....no correction yet but I have my finger on the locking button. I have soo many people that no mater what I say want to wait it out...WHY!!!

Lewis, Media hype, maybe. They are of curse going to try and link the events of Sunday with the bailout and rate drop and say the 2 are connected. Of course, we all know that is a bunch of bunk. Nonetheless, it hopefully will bring some borrowers back that have higher rates or ARM resets back to the market, provided they have enough equity and ytheir credit remained in good shape. Time will tell....business as usual though.

Thanks

you have some good points

A refi boom relies not only on lower rates but also having enough equity and guidelines that will allow people to qualify. Where is that going to come from?

I will go into the camp that says lower rates for the rest of the year.

However this will not cure what ails the economy.

whatever happens, I just hope that things start to even out, I want off the roller coaster :)

I believe in the hope! I believe that in 6 months those of us that are left standing will be in position to do great things. Just hang on!!!

There are so many pieces to this puzzle that need to fall into place in order to ttobtain a real turnaround. That being said a first step is always needed. Wouldn't we all like to have a crystal ball.

This is a great time for first time home buyers to lock into a great rate!

FWIW, Would also like to see all the loan level price adjustments go away now that FANNIE & FREDDIE are government entities. I can see a 680 threshold, but 680-699, 700-719, 720-740 - that's ridiculous. Fannie Mae & Freddie Mac made bad decisions buying to many No Doc Alt A loans and then stuck prime borrowers with the tab. IMHO

As long as inflation stays "under control", meaning the economy keeps creeping along without enough new job creation to allow for wage based inflation, there is no real reason to expect rates to jump. We are in a very "Bond Friendly" environment for the next several weeks to month's, so I see no reason to worry about rates. While the Federal government has taken an ever increasingly proactive role in managing our economy, they haven't completely screwed it up yet. On the other hand, those who think it realistic to wait for interest rates in the very low 5's need to take a more historical look at what a good interest rate really is! I report on this daily in my Market Update on my blog, if you look back through that for the past few months you'll see why I feel this way.

Ron Brown

FHA & VA Loan Specialist

First Mortgage Company of Washington

Lewis - I'm with many of the folks who have commented above, glad to see some positive come out of this roller coaster market we've been riding. Like Janet, I'm happy to see the lower rates, and will be happy to see homeowners/purchasers benefit from the 5's again. Refinance business? I don't expect to see a whole lot from my client base (California & Southern Oregon), since the values have not been moving in their favor. I think this (FNMA/FHLMC conservatorship + lower interest rates) is a link in our chain of moving back on to level plain again.

SEP

2008

The rates are good but it is getting people qualified that is a problem! From first time home buyers to jumbo loans it is a challenge!

Rates will continue to drop for the remainder of the year. I'd be very surprised if we didn't improve another .25% - .5%. Let your database know what's coming!

SEP

2008

Lewis, great post. I see rates remaining low and going lower through the end of the year. I see last Monday as the correction since there was so much cushion. It will be a challenge to refi folks that bought in 2005-2007 with little or no money down, but I see a lot of hope with those that bought pre-2005 and future purchases.

SEP

2008

wow - look back at the comments.... how much has changed even since this post?? It is like every week brings a new cast of companies to the drama........ it never ends..........

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