St. Louis Real Estate - Mortgage News - Falling Rates
Are Rates Falling? by Chris Scheer, Branch Manager, Cornerstone Mortgage, O'Fallon, MO
Well the year has started off with interest rates heading lower, but have they really? With Fannie Mae and Freddie Mac adding risk based pricing to their delivery fees for all loans delivered after March 1, 2008, see Fannie Mae. Who knows what the rate will be at any given time. Couple that with this announcement; see Adverse Market Delivery Charge.
And the interest rate that I thought we should have is now at least .125% higher and in some cases .375% higher. Even though the price of mortgage backed securities continues to rise and the yield or effective interest rate is falling, the interest rate for most consumers is actually going up or staying the same!
Economic news favored rates falling and currently the trend has been favorable. However this week we have at least 3 Fed Governors speaking at various functions and the minutes from the December Fed meeting will be released. The market watchers will spend far too many hours dissecting the comments from these and we will see the bond market either give up its gains or take on a whole new energy as anticipation of the next Fed meeting begins. Either way, at this point it is going to take a strong push to get the 30 year fixed back down to 5.5% or below. Mostly due to the above mentioned pricing by Fannie and Freddie, but also keep in mind that the secondary departments of the major investment banks are under pressure to be profitable with the REO departments getting killed with all of the foreclosures. Thus when they do their pricing models, expect them to error on the conservative side.
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