Posts Tagged ‘fed’

Morning Market Update 12/18/09

Friday, December 18th, 2009

Currently down around 12 bps, there are no economic reports coming out today.

Yesterday was a decent day in terms of mortgage bonds, as we were in the green practically all day.

Bernanke got voted in for a second term as Fed Chairman, and the Fed stated that they intended to keep rates low for an extended period of time, however, the MBS purchase program is going to end on March 31, 2010. The MBS (mortgage backed securities program) is where the Fed buys pools of various mortgage bonds in case you didn’t know.

Let’s clear something up very quickly.

When speaking to several clients, I hear “Oh the Fed is ‘reducing’ rates” or “I heard the Fed is keeping rates at 0%” and expect a 0% mortgage rate on their home loan- THIS DOES NOT MEAN MORTGAGE RATES FOLKS.

The Fed does not control mortgage rates. Mortgage Backed Securities are what determine mortgage rates and it depends on how those securities are traded and at what price that result in the current market mortgage rates.

What the Fed controls is the “Fed Funds Rate” or “Discount Rate” and that is it. These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans, and most importantly the rate in which banks charge one another to lend money to each other overnight (overnight lending rate). This is basically for one day loans that banks facilitate between themselves to ensure liquidity. When the Fed announces a “cut in rates”, mortgage rates most often will actually move in the opposite direction as the Fed change, as this has to do with the dynamics within the financial markets.

Please read this as it is very important!

  1. MBS Program set to expire soon
  2. Tax Credit Ending soon
  3. FHA Guidelines possibly tightening up
  4. RESPA Changes

Folks, if you are looking to buy a home or refinance, NOW IS THE TIME TO DO IT while rates are still low and the incentives are still here. This is not going to last forever!

Take advantage while you can, and have a fantastic Friday!

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FHA Rates are SUPER LOW! But Be Careful…

Wednesday, December 17th, 2008

Ok, so let’s take a look at this VERY CLOSELY:

For a 30 year-4.75%.

For a 15 year- 4.5%.

When I was locking in a rate this morning for a home purchase closing this month, I stuttered and had a “WOW” look on my face. Rates haven’t been this low in years, and several of my past clients have been calling to refinance their current mortgage the past couple weeks- even if they AREN’T in an FHA mortgage.

It doesn’t make sense all the time to go from a conventional mortgage to an FHA, but in specific circumstances, it is VERY financially feasible.

So here’s the CONDENSED explanation on why what’s happening is happening.

For the last 6 months the Fed and the Treasury have made unprecedented moves to help the economy, but despite all their efforts, mortgage rates weren’t really effected and they were actually increasing.

That is, until yesterday.  In a matter of minutes yesterday morning, mortgage rates have taken a dive to lows we haven’t seen in years.  Why?  The Federal Reserve announced plans to buy $600 billion in debt and assets from Fannie Mae and Freddie Mac in order to oil the housing finance market and “reduce the cost and increase the availability of credit.”

It will be interesting to see how long this drop will last – given the volatility in the market it could last hours, days or months- there’s NO telling.

What I CAN give you is advice, however. When there’s a SMALL WINDOW OF OPPORTUNITY such as this, you need to capitalize on it and take advantage. You can contact me and we can do a Mortgage Check-Up (revisiting your current mortgage terms) for you at NO COST.

If you can save money, I’ll tell you. If you CAN’T and its not worth it, I’ll tell you as well.

And PLEASE, PLEEEEASE do not get greedy when it comes to these low mortgage rates. What many people do time and time again is say “Oh, let’s see if it’ll go lower.”

My suggestion- DON’T GAMBLE! Do you know any gamblers that still have any money left?

You will end up waiting yourself OUT of the market and looking back WISHING you would have gone the safe route.

Find a rate that’s low enough for you. Determine if you can live with it. Then roll with it!

Straightforward, simple, and educated advice.

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