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The Mortgage Street Smarts of where mortgage interest rates are going (and why):
The following information is current as of Wednesday 5-4-2011 and will help you understand todays best mortgage rates. If you are a Buyer/Borrower who is still on the fence (or if you are a Real Estate Agent attempting to educate your "on the fence" Buyer), please review these trends and secure an historically low interest rate before it is too late.
The market closed Tuesday with an IMPROVEMENT to pricing (and will typically warrant a pricing adjustment by most Lenders). Tuesday's IMPROVEMENT resulted in a change of 3 basis points (bps).
The following chart shows market activity over the past 10 days (hint: green is good, red is bad):
The following chart shows market activity over the past 1 month:
Daily Interest Rate Snapshot (sample of rates from one of the country's largest Lenders...individual pricing will vary based on specific Borrower qualifications): NOTE: This Lender has quoted a 1.00% Origination Fee (1 Point) to accompany this pricing. It bears noting that this chart does not necessarily represent todays best mortgage rates.
Market Commentary (courtesy of Bill Fisher)
"QE2, as the program was dubbed, will come to a close sometime by the end of June. To the extent that economic activity was boosted by the program, we could very well see a falloff in growth of a like amount. Discounting future growth may be at the heart of the recent decline in interest rates. Certainly, a decline [in] inflation wouldn't be." [Keith Gumbinger, HSH Associates)
Okay, let's see if we can get this right. The end of the QE2 program may mean a decline in the economic growth that was stimulated by the program (though there is little evidence that QE2 rustled up a significant amount of growth). And investors in the markets, Gumbinger asserts, are very likely already factoring that decline into their assessment of present economic growth. Therefore, interest rates-which fall when investors turn to Treasury securities-have already eased...much to our surprise. And they may ease further...as economic growth eases further.
Wait a minute. I have great respect for Keith Gumbinger and gratitude for the work his company does. But sheesh! I think we're acting like dumpster divers here, sorting among the detritus for some way of explaining what's been happening in the recent past. Couldn't we, nearly equally, argue that rates should be rising because they will soon lack the support of the Fed which, as you doubtless recall, has been buying up Treasury securities like there's no tomorrow and keeping that market as liquid as the Colorado River, stifling most inclinations for interest rates to rise?
I sympathize. I really don't know which end is up at this point. I only know (1) that it is nearly impossible to explain what interest rates are doing and will be doing soon and why, and (2) those who seem convinced that they do know have earned increased skepticism (from me, at least).
There is a crowd that is certain inflation is about to be released upon the land like some kind of plague. In fact, many argue that it's already out there, trying to work its way into our wallets and investment accounts. These analysts have been congratulating themselves on the continued upward movements for gold and silver, acting as if there's a party going on here and they're the only ones who answered the invitations sent out by the changing economy. They advise that we continue to buy silver and gold, that the values will continue rising inexorably (we haven't reached the inflation-adjusted peak hit by gold in the 1980s, after all), and that the overall economy is about to be utterly ravaged by inflation, taking the value of inflation hedges higher and higher.
Last Friday, silver's price fell off its high water mark, leaving investors dangling like one of those annoying "To Be Continued" endings to a movie mystery. Thankfully (I guess), we need only wait until Monday for some idea of which way silver will go now. Will it saunter into a correction that takes its value a good deal lower, or will it flaunt its unpredictability and rise further. Stay tuned...