Posts Tagged ‘interest rates’

Mortgage rates remained constant for the third week in a row. These low interest rates have been holding steady for the last three months. At the Federal Reserve’s policy meeting that was held on September 23rd, Chairman Bernanke told the media of the Feds plan to hold its benchmark interest rate “exceptionally low for an extended period”. The 30 year conforming interest rate is around 5.25% APR. FHA 30 year rates are not that far behind with rates around 5.625% APR. This means that the Fed is committed to doing its part to see our economy pull out of this recession. President Obama has said earlier that he expects unemployment to rise from the August rate of 9.7% until the end of the year, but during the first quarter of 2010 our country should start to see unemployment hold steady and start to reverse its course. I hope they are right.


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If you are a first-time homebuyer now would be the time that you should be putting in your offer on your first home. Why now? There are a number of reasons that I will explain. One, President Obama’s $8,000 tax incentive ends at the end of November and it doesn’t appear that he will extend the deadline. In order to qualify you must be a first time home buyer or not have owned a home for the last 36 months and you need to close by the end of November. Most real estate closings are done within 45 days so you need to find a house soon in order to take advantage of the incentive. Two, mortgage rates are at their lowest levels in months and are close to their 30 year lows. FHA, VA and Conventional loans can be used to qualify. Three, Home prices are at their lowest levels since the early 90’s. Four, Fed chairman Ben Bernanke said today that he believes that the economy is on the road to recovery. If you don’t act soon you may miss the opportunity.

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To refinance or not to refinance, is this weeks topic. With current mortgage interest rate trends the way they are I thought it was important to write this weeks blog about the benefit of refinancing now as opposed to waiting for a month or two. It doesn’t matter if you have an FHA, VA or Conventional loan, now is the right time to refinance or streamline your existing loan. Most economic indicators show that we are starting to pull out of this recession. With President Obama’s reappointment of Fed Chairman Ben Bernanke it is obvious he feels our economy is on the right track and the Fed Chairman is doing a good job. With an improving economy, inflation looming and a reappointed Fed chairman, can a hike in the Fed Funds rate be that far behind? No! I believe that by the first quarter of 2010 our economy will have improved to such a degree that the Fed will see inflation as a threat and raise the discount rate thus raising our mortgage rates. I know that this is all very confusing but it is safe to say that interest rates are near an all time low. So why gamble?

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I was asked a question earlier this week, “Why are mortgage interest rates so volatile?” The answer is extremely complicated so I tried to come up with a way to explain rate volatility while not making her eyes gloss over with boredom. The easiest answer is profit and loss. Lenders only change rates when they believe they can make more of a profit (rates come down) or they are worried that their rate spread might be impacted (rates go up). This is a very simplistic way to view the mortgage market but in a pinch it will help a person who is not in the mortgage business to understand when the right time is to lock. For instance today the FNMA 30 year mortgage bond closed 25 basis points higher than when it opened this morning. This left lenders in a position to reprice conventional and FHA rates better. Why would they do this? In a word, profit. The lower interest rates are, the more deals they will close. But the lender will not allow their interest rate spread to be affected. So, by Monday if the Bond market is down, rates will go up. If you follow my twitter account @Hollander_FHA, you will see my tweets that tell you when to lock a rate or when to float with the market. When I say lock it means rates are going up and when I say float it means rates are coming down.

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After a turbulent week we closed with interest rates climbing a little. This was due to better than expected economic news and the fact that Fed Chairman Bernanke stating that the economy was close to a recovery. That sent the stock market up and the bond market down. This ultimately raised mortgage rates. I believe that this was nothing but smoke and mirrors with the national unemployment rate rising to 9.5% unemployment rate rose to 11.2% in California and over 12% in Nevada. These numbers have not been seen since the early 80’s. The reason for my disappointment is this. If mortgage rates continue to climb and we see FHA rates climb to 6% it will halt approximately half of the loans currently in process. The reason for this is they will no longer qualify. My belief is that today was just another dip on the current rollercoaster ride that has become the FNMA 30 year mortgage bond market. Til next week.

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The FNMA 30 year mortgage bond continued its weekly roller coaster ride this week and went from good to bad as the week progressed. Friday saw the worst prices of the week which increased rates substantially from Monday’s opening. The reason for the increase in interest rates was a surprising decrease in unemployment claims. This is just another turn in an already crazy market. I fully expect interest rates to recover and go back down in the next few weeks. In fact it will probably happen earlier if the current roller coaster ride continues. Just an FYI, FHA interest rates traditionally don’t adjust as quickly as Conventional rates. So if you are looking to lock in a FHA interest rate with your lender you may notice that your rate has not moved much this week.

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