Interest Rate Direction

Mortgage and Lending with Loan Network LLC

Once people know that I am a Loan Officer the very next thing out of their mouth is "What's going on with Interest Rates ". This is a hot topic that has no easy answer but demands some sort of answer and here is mine.

 We are witnessing a meltdown in the mortgage industry like we have never seen before. The commodity that I deal in is the Mortgage Backed Securities or the MBS. This commodity is bought and sold on the open trading floor. It has always been a safe place to invest whether you are a commodities trader or manage a large investment portfolio. In the past the MBS have been as safe as a CD or passbook savings. The "Risk" was very low. Today with all the fallout from lenders like Countrywide, Washington Mutual, First Magnus and Bears and Sterns making headline news (and the rise of the foreclosure rate) this commodity is now viewed as risky! When you are dealing with a commodity that has some tarnish, it now has to be priced to sell with the "Perception" of risk.

Another thing people say is "But what about all the Fed cuts? Why aren't rates lower?". Historically interest rates have always moved ahead of any of the Fed cuts, up or down. Even though the Fed doesn't control the interest rates on MBS mortgage interest rates do tend to follow the direction the Fed is moving. So in theory with all the Fed cuts we should be at or below 5% but with my last comments about the risk involved we will be lucky to see rates below 5.5%.

 Remember, I'm right only about half the time, the market is always right!

Comments (4)

John Walters
Frank Rubi Real Estate - Slidell, LA
Licensed in Louisiana
Yep we need that crystal ball.  I also have heard from another mortgage broker about the increased risk so the rates are staying higher.
Mar 24, 2008 12:25 PM
Keith Berne
RE/MAX Equity Group, Inc. - Portland, OR
Real Estate Broker, Realtor, GRI
um, I thought real estate was supposed to be easy. The good news is, buyers who must buy are starting to climb off the fence since we've been bumping just under 6. Let's hope it stays there. I think this adminstration will do its darndest to go out on a positive note, let's hope it's housing!
Mar 24, 2008 12:30 PM
Kirk Westervelt
Van West Realty - Greenville, SC Realtor -Short Sale Expert! - Greenville, SC
Kirk Westervelt, Broker In Charge, Van West Realty - CDPE - Short Sale Agent - Home for Sale - Greenville, Simpsonvil...
Steve, welcome to Active Rain! Good blog! The mortgage industry seems to change so frequently now that I am constantly pushing my clients to have the most current pre-approval from a lender ready to go, when they wish to make an offer.
Mar 24, 2008 02:04 PM
Danny Thornton
R & D Art - Knoxville, TN
WordPress Guru
Steve, first, let me welcome you to ActiveRain. Secondly, thanks for blogging here in the Rain on your first day. And lastly, if there is anything that I can do for you to help your experience here in ActiveRain a better one, please do not hesitate to ask.
Mar 25, 2008 12:11 PM