Last time we talked about the potential impact of loan modifications on credit scores and the subsequent ripple effect. Visit our newsletter archive for this and other past newsletters on www.cwcfinancial.com.

The Easy Story on Interest Rates

In this newsletter, we are going to provide information on why interest rates have been low and why they should remain that way - or increase slightly - until March of 2010.

What most people do not realize is that mortgage rates are mostly driven by the Mortgage Backed Securities market. When investors buy Mortgage Backed Securities, the price of those securities increase - which means interest rates decrease.

The other thing many people don't realize is that late in 2008, the Fed committed to buy Mortgage Backed Securities through the end of 2009. At first they said $500 billion (see December 2008 newsletter on our web site) and that number grew to $1.25 trillion dollars. In August of 2009, they indicated they would buy "up to" that amount. Now, they have committed to spending all of it. This, of course, is the main reason that most mortgage rates have gotten and remained so low this year. To date, they are about two thirds the way through this purchase program.

The good news is that the Fed has decided to extend the Mortgage Backed Securities purchase program until March of 2010 but it will be slowly phasing out that program. The reason they are slowly phasing it out is because they don't want to disrupt the mortgage market, housing activity and the broader credit markets. This means time may be running out to take advantage of these low rates. It appears that April 2009 was the low and volatility and rate increases are the trend.

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