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Interest Rates - A quick market report - RATES GOING LOWER.. or not?

mortgage rates lower

Mortgage Interest Rates - They are becoming a big topic of conversation in recent weeks. About a month ago, there were many reports stating that rates will come down to 4.5%. And depending on how you look at it, we are just about there.

This is all based on a FHA mortgage ..... (Conventional rates are about 1/2 pt worse and even more so, depending on your credit scores)

4.50% would cost any where from 1 3/4 pts to 2 3/4 pts, depending on your loan amount and the state that you live in.

5.00% would cost any where from zero points to 1 pt, again, depending on your loan amount and the state that you live in.

So what is the deal? Yes, rates are very low. The MBS's (mortgage backed securities) are being bought by government funds, which have driven the rates lower. But in my honest opinion, I don't see them staying low for any time long. Don't get use to this.

problem with rates

So here is the problem to where I see things. Again, the MBS's are being bought and in many cases, usually become stronger and more attractive, and this helps lower rates. The 4.5% coupon and the 5.0% coupon is very cheap right now, which you would think rates would be lower. Coupled with the fact that the stock market has been losing daily, except for a slight gain today. Also the 10 year yield rose slightly today, but for the week, has been lower than in previous weeks.

What does this mean? Typically when what was mentioned above happens, rates usually come down. But the problem with this is that they are the lowest in many years. And I don't see them staying low for any length of time. If I had to put a time frame on it, possibly staying low for 1 1/2 weeks, or maybe the possibility of a whole month. But that would be pushing it. What would be my reasons for rates to increase?

Jeff's reasons.... one of the basics is that we just can't sustain low rates for the long term. This will do more harm than good. Sure, it's helped refinances to increase in recent weeks. But the purchase market has slightly increased. More and more people seem to be sitting on the fence, waiting for rates to lower. PEOPLE... listen up.... if you had plans to buy, buy now, don't wait.

Conclusion : As mentioned, we can't sustain low rates. Consumer spending is slowing, yields will rise, and there is speculation that President - Elect Barack Obama will increase borrowing to record highs to pay for his economic rescue package. With all of that, you would have the risk of inflation rising. Low mortgage rates do not always jump start the economy. If people save a $100 here or there, it doesn't get replaced into our economy in areas that are most critical. Lowering your mortgage payment on your new home, should not mean that you buy more or bigger. It should allow you to save more, hence one of the reasons why we are in this mess. This is not a fluff post or to make you happy post. It's reality and we need to see past the low rates. This post should have read, rates possibly going up, but I wanted to get your attention.

If you have been thinking about refinancing, do it now. If it makes sense 3 weeks ago, do it now. If you are waiting for lower rates, I won't feel for you when rates do go up, when they increase. Don't buy because rates are down, buy because you can afford it and think of lower rates as a bonus... or that you won the lottery.

PS.... and if you want bragging rights amongst your neighbors, co-workers, and family... put that behind you and save money, don't lose money. Besides, every borrower is different, because of credit score & LTV (loan to value), so one rate will be different than the other. That is just a fact. Don't be left behind because you wanted to brag the loudest, be a winner in your own world.

For two other good posts that give some other insights to what I didn't talk about, please read these :

Market Direction with common sense explanation by : Larry Bettag

Mortgage Rates Report - January 14th, 2009 by : Brian Brady

The Rate/waiting game by : Jason Sardi

- FHA Loans - USDA Loans - Conventional Loans - VA Loans - Mortgages -

Experience & Knowledge at its BEST !!!

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2008-2009 Tax Credit for First Time Homebuyers : 2008 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Posted by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans on 01/15/2009 09:16 PM

Comments (29)

Interest Rates in the Mortgage / Finance Channel

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Originally posted at: FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware: Interest Rates - A quick market report - RATES GOING LOWER.. or not?

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29 Comments on Interest Rates - A quick market report - RATES GOING LOWER.. or not?

JAN

I fear the direction rates will go with the government easing out of all the MBS purchasing (when they do). I've been more proactive now expressing to people the urgency, while trying to do it tactfully and with sound data. You know as well as I, some people get a rate like 4% in their head, and miss out on 4.125% when it saved the $350 a month.

OK...I'm the first to banter here. Needless to say, I do think that they'll stay sub 5....As you know the MBS commitment will stay strong until at least April, but that doesn't mean that the rates will lower further. But if they do, it won't be much lower. The bottom line is that people thinking about making a move don't have much time. This is the bottom of the sine curve....we just don't know if it's the itty bitty bottom. Lock in .... NOW~!

Jeff, I am at a loss as to what will happen in the coming weeks. While I agree that rates cannot remain low - I still believe that in order to spur those who can purchase a home into doing so - the rates are what will entice them. Thus far it has not worked as well as we would have hoped.

The massive debt that the government is in and will continue to dig in a blind effort to get our economy back on track will only make matters worse I am afraid.

They had to come down, since Congress was wondering where the money for the bank bailouts went. Many people are scared due to the economy and the lack of jobs or worse yet their jobs disappearing. We need more than interest rates creeping down slowly...

;>)

I'm thankful to have just re-fied for under 5% without a buy-down...we really do not know what is going to happen from day to day and the difference of a few dollars isn't worth the "let's wait and see." The people I'm talking to are still waiting for housing prices to take a deep dive and they just aren't in my market.

STEVE.... I think the mortgage veterans will educate and express this more than ever, as you stated. It's in their head... I know a loan officer who lost a borrower to a rate of 4.875% and he was giving 5.00%... yet the other person had no fees and reduced points. hhhmmm.. 4.875% sounds way better than 5%, yet 5% is costing a whole point less than 4.875%. You and I understand the cost of coupons, yet people will believe what they want to hear. And you are right, there should be urgency, and I am not seeing that as much. Thanks for your feedback.

LARRY..... well, define sub 5... meaning, sure, but at what cost. As I mentioned, even 4.5% is not costing as much now. But okay, so rates stay sub 5, but they go to 4.75%, yet cost more later than what 4.5% is now. Okay, so you win by theory, but the consumer loses out in money. Just my opinion on that, trying to define this in more detail, making the consumer understand it more... but yes, LOCK IN NOW>..

TIM & PAM..... that's the bottom line... all of this will make it worse for us at the end... the light at the end of the tunnel might not be seen for years. And sure, lower rates should help, but again, it shouldn't be about the rates... it should be about the payment. What payment are you comfortable with... I can't stress that enough... thanks

ANN-MARIE.... not really, that they had to come down.... but the fact of the matter is that they are down. And yes, we need more than lower rates... we need stability. But outside of that, many are stable.. just more are stubborn. Sure, people are scared, but those that seem to be secure, they have other excuses and or reasons. They should listen to some of us experts, if it makes sense... thanks for you input.

ANN..... that is an understatement, that you can lead the horse to the water, yet you can't make it drink the water. I fear many things, but at this moment, borrowers that think they know better and who gamble. I have a gentleman that could save close to $300 a month. We have 2 small dings on his credit to clear up... but in his reply, he thanked me and said, they will wait, work on this, and hope to do something in 2 months. Huh? Let me help you now... and let's put that $300 in your pocket now.. I don't want to be forceful, but this could be very costly for them in a few months.... and they know that they are staying in the home for over 5 years, because of the school system. In any case, thanks for the compliment. (just a FYI... there was an Ann that left a comment... but she left two work links, her number, and a business statement to consumers about her business. I asked her to leave the comment, but to delete the links and number, which many of us call spam... well, she deleted the whole comment.... funny yet sad)

It will be interesting to see what happens. I can see them trending upward but not by a large amount. I bet they stay in a fairly narrow range for the next few months.

Jeff, ah yes, the fence sitters. I seen more than my fair share this week. One today, whose family owns a produce business, told me his father said he thought rates were going lower. I asked him did his father want to ask me what I thought the price of oranges were going lower.

Jay

Good one Jeff. And I really like Larry's line to drive it home, "The bottom line is that people thinking about making a move don't have much time."

JODDIE..... . that's a great rate, anything under 5%. Hell... even 5% is a great rate and that is the whole problem with all of that. And yes, we don't know where all of this is going to go... I am going to add a sentence to my blog now, after reading your comment... thanks

BILL.... . yes, it will... I just know that it can't stay like this for long. Bernanke has a plan to fight inflation, yet keep deflation from happening. And low rates would not help his cause.... just wait and see. I wrote this... Inflation vs Deflation

JAY..... . many fence sitters. Soon there won't be any fences to sit on... lol And I like your comment to the produce person... people need to face reality... thanks

KEN..... thanks, I really appreciate that comment, coming from a money geek per se and someone with over 20 years in the mortgage business. And yes, Larry did drive it home, stating thatpeople won't have much time...

Jeff,

For the fence sitters, home buying or refinance, it's a rare borrower who can catch the ultimate low point in rates, so it's really useless to even try. Rates are now extremely attractive, and as you say, may not stay there very long.

Jeff- I so agree with you! Time to buy is now and rates will go up, they have to. We are going to have inflation:(

JAN

Good post. I have a question, "Can I repost this to Localism"?

ESKO.... . I agree, to catch it at the most perfect time, impossible... if it fits and makes sense, do it... waiting could cost you more money in the long run. But if everyone took our advice, life wouldn't be challenging, right? lol

NESTOR..... . especially now more than ever before...they will go up, but when. And yes, we will go into an inflationary period if we allow lower rates to continue...

REBECCA.... . thank you for the compliment. You can reblog this or any of my blogs. For you to get it to your localism post? I would assume when you reblog it, just make sure you stick it into a specific state, county, and town also. That should work... thanks and thanks for asking.

Thanks for your post. I feel that rates are at bottom. Now folks need to pull the trigger while we still have value. Recent announcements in sales will further hurt folks trying to refi and folks looking to purchase may not have comps that will support value.

Good post again

Tony

Jeff - Well, looks like we were indeed thinking about the same thing. Well said, in that "tongue" of yours. I think you are right in that our economy cannot sustain these rates for too long. In fact, we've already sustained these rates for too long in my opinion... probably in retort to everything else that has gone down with our economy. For the fence sitters, perhaps we are wrong... but get everything (application & supporting documentation) in gear anyway so you can pull the trigger when that right time comes.

great post, seems like some more auctions , assuming the are successful sales, we will get some more liquidtiy , much need, in the credit markets

Jeff, once again your information is priceless! I'll be reblogging this as well to help get the info out there!

Brian.

Jeff,

I don't know if you caught my post a while back about mortgage rates hitting double digits, but that may be a reality even before year's end for multiple reasons, many of which you mentioned. The bottom line is that the Fed will continue to artificially prop MBS pricing in their latest feeble effort to keep mortgage rates low to stimulate the housing market. With all of the government spending, hyper-inflation, or maybe we could even say, hyper-stagflation(?), is likely to occur and that will only serve to drive mortgage rates through the roof.

Mortgage rates are likely as low as we will see, even if MBS pricing improves through Fed action, so borrowers need to get of their butts and buy, refi, or whatever and do it now, before reality sets in.

Jeff--Good points...Another to consider is just how much is that 1/2 point you are waiting for really going to make in the payment. If it is minimal up or down, why not lock now?

Jeff - AMEN!!! I agree 100% and I've been telling my clients and prospects that for weeks. Some listen; others just don't get it. Human nature , my friend. Unfortunately, there is no helping some people.

JUST A fyi........SINCE I HAVE WRITTEN THIS, MOST LENDERS HAVE LOST ABOUT 1/2 OF A POINT to 5/8 of a point, WHICH IS VERY CLOSE TO AN 1/8 OF PERCENT IN RATE to a 1/4 percent in rate lost in 1 day.

Jeff: Thanks. It appears rates worsened today by quite a bit. Oh well. I agree with you. I expect rates to tick up in the Spring so the fence-sitters should take advantage of the lower rates now if at all possible.

TONY.... . yes, I agree, they need to pull the trigger now. As you can see by my update, rates moved over an 1/8 of a percent today. We had a mid-afternoon change for the worse, even after starting off worse from yesterdays closing bell. thanks for the compliment.

JASON..... . yes, we were thinking alike yesterday... and yes, not only can we sustain these low rates now, that it's been to long already. Good point... and yes, as you stated in your post, get the paperwork ready now, not later. thanks

JAMES..... . the credit markets is a mess. And liquidity right now in my opinion is not going to help. Just to many other factors and unknowns to keep rates down. The biggie... inflation, hence why I think rates will go up no matter what. thanks for the compliment.

BRIAN & MARIE..... . well, thank you kindly for the polite words and for the support.. and for reblogging this. Again, thanks

ROBERT..... . no, I didn't see it.... I will look for it or just e-mail it to me. And yes, no matter how much the gov't sinks into buying up the MBS's, rates in my opinion will increase... and I appreciate the fact that you follow the market very well and that you know what you are talking about. In any case, thanks for the great input and feedback.

TERI.... . bingo, is a half point or an 1/8 of a percent in rate going to kill you? Or even a 1/4 of a percent? Good points... and thanks for the compliment.

DONNE.... . of course some don't listen. and yes, it is human nature....but you have to love those that think they know better... or get bad advice. Thanks for the comment...

JAN

The Fed will be keeping rates low for awhile to put a floor under the housing market. It probably won't work.

PAUL.... . I expect rates to tick up before spring.... as I mentioned in some of my other blogs, we can't sustain low rates any longer... Bernanke needs to keep inflation out of the mix and low rates won't help. But even 6% is good.... the question, what will they be at the end of the year? I say around 7.5% to 8.0%...

DREW aka The Lending Edge.... . I disagree with that statement. The Feds don't truly control interest rates. They can try and control short term rates though. And read my comment to Paul and a few others. Besides, the lower rates now are only stirring up major refinances. Purchases aren't up as much as one would figure with low rates. People need to save money to buy. thanks for stopping by.

JAN

Oh my!! Thank you so much for great information. I appreciate everything I learn here

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