Shop and Bonds Drop!

Mortgage and Lending with Guaranteed Rate NMLS# 2611 NMLS #208860

 A big economic number was released this morning called the PCE (Personal Consumptions Expenditures).  It basically measures how much the average consumer is spending and believe it or not, wallets and purses are coming out more than ever.  The number was expected to come in at 2.0%, but it exceeded that by measuring 2.2%.  Great news for stocks, but bad news for interest rates.

Why?  If people are spending more, then retailers and service providers can raise their prices.  Translation = inflation.  Inflation is the nemesis of mortgage-backed securities as it indicates potential problems for our economy, and if we have the threat of it, money comes out of the bond market.  True to form, the Fannie Mae 30-yr fixed 5.5% security is down 22 basis points (bps) this morning and rates will be higher by around .125%.

Still, with rates in the low 6%'s, and property values at an attractive level, there's no better time to buy or refi then right now.  Align yourself with a mortgage professional and start 2008 off with a mission to have the best year ever.

Comments (3)

Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator
Michael - I think we have all forgotten how it was until the early 2k's "Still, with rates in the low 6%'s" - people reading this: THE RATES ARE LOW! All of the "bad loans" are gone. Stay with a small, local lender/broker like Blue Skye and don't fall for the disinformation from the big national advertisers. The chances of seeing rates at 2005 levels ever again in your life are minuscule! THIS IS A BUYER'S MARKET. Call Michael and get pre-approved TODAY (unless of course you're borrowing in Georgia ;)
Dec 21, 2007 01:47 AM
Sandy Nelson
Riley Jackson Real Estate Inc. - Olympia, WA
your Olympia area Realtor


I always thought that if the bond market drops, interest rates drop also. Was I wrong?


Dec 21, 2007 01:58 AM
Mike Tullio
Guaranteed Rate NMLS# 2611 - Sarasota, FL
VP of Mortgage Lending
Thanks for the question Sandy (and the great comments Ken!).  The bond market, and in particular, the mortgage-backed bond market is very economically sensitive.  If there's inflationary news that would prevent foreign investors and institutional buyers from keeping their money in bonds, the folks like Fannie Mae selling the bonds have to lower the price to make it more attractive.  Lower bond prices mean lenders have to raise their rates to make money.  It's weird and somewhat counter-intuitive, but aren't a lot of things these days?
Dec 21, 2007 02:10 AM