Last month we talked about 4.5% 30 year fixed rate mortgages and the new appraisal rules that are rapidly approaching.
Now that we have had about a month to observe these mortgage rate trends, following is an overview and update:
This week, the Fed kept the Fed Funds Rate steady at 0 - .25%, the lowest range ever, and this was no surprise. However, they did offer some interesting comments with their statement indicating that they anticipate "economic conditions are likely to warrant exceptionally low levels of the Federal Funds Rate for some time" and that "inflation pressures will remain subdued in coming quarters". They went on to say that the Federal Reserve continues their plan to purchase large quantities of Mortgage Backed Securities to provide support to the mortgage and housing markets, and "it stands ready to expand the quantity of such purchases and the duration of the purchase program as conditions warrant".
DO NOT translate this to read "rates will continue to drop and remain there into the summer."
Based on the Fed's actions, many of you have been waiting for the 4.5% zero point loan (on loans up to $417,000) but here's one reason we may not get there. Yes, the Fed has been buying Mortgage Bonds, but if you look at what they are purchasing, they are buying a lot of FNMA 30-yr 5.5% and 5.0% Bonds, (click here to see the Fed purchases) which won't have much of a positive effect on present rates. Why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed...and maybe even a little sneaky...because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%. These are precisely the loans that are being refinanced today. Therefore, many of the mortgages in the FNMA 5.5% pools will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. This is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. So the Fed buying higher rate coupons will not necessarily get rates to 4.5%, but it should put a ceiling on how high rates can go during the near term.
Another important thing to realize is that if it makes sense to refinance right now and it means you could save hundreds of dollars per month, you would be wise to pull to trigger now. For example, if your proposed refi offers a potential savings of $300 per month and you decide to hold out for a lower rate to potentially save another $30/month, this decision is effectively COSTING you $300 per month in savings -- in other words, it could take you years to recoup the savings you could be enjoying today.
If you want to see an accurate reflection of mortgage rates, click here to go to Freddie Mac's weekly rate survey - this is one of the most reliable sources for accurate interest rate trends... When comparing these rates to what I can offer, you can quickly see the advantages of working with a mortgage broker...
As always, we welcome you to give us a call or drop us a note anytime so that we can analyze your individual situation and advise what strategy might serve your best interest based on the present market.
Sincerely,
Your CWC Financial Loan Team
888-711-5454 Toll Free / 415-454-1130
info@cwcfinancial.com |
