Bryan Flynn's Central Massachusetts Mortgage Blog

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Rates, rates, rates what is going on with rates?

Let's just throw out the adjustable rates for now, clients are scared, and no one wants them fixed rates are usually a better or very close the same rate anyway, except for maybe the 3/1 ARM because of the inverted or flat yield curve(what ever those are) so I won't speak of them.

How are mortgage rates determined?  From Mortgage Backed Securities or Mortgage Bonds NOT the 10 year treasury note like many believe.

 Rates are way off their lows of month ago right around 6.25% -6.375% for a 60 day lock today 2.26.08 as of 1:10pm EST on 30 year conforming (that is below $417,000 in most areas).  They did touch as low as 5% before on January 23rd for a very short time period. 

So why have they turned so rapidly?  Inflationary fears, with rising inflation, the value of a dollar in the future is considered less valuable causing demand for a higher yield on mortgage bonds, which drives trading prices lower on these bond thus causing rates to rise.

Bonds keep testing the 200 day moving average and have yet to close below that level.  If they do watch out...rates to rise another .25% or so. 

 So keep an eye out for inflation concerns as well as an increase in unemployment, those equal bad news for mortgage bonds and cause rates to increase.

 Please feel free to ask more information about rates, whether a Loan Officer or not, I can keep you up to date and help you provide more value to your clients.

Comment balloon 16 commentsBryan Flynn • February 26 2008 12:16PM

Comments

What is your prediction for later in the year?  Do you expect rates to drop at all again come spring when housing sales are typically up?

mariaholland@comcast.net

Posted by Maria Holland, Realtor, ABR, GRI, CDPE, SFR (RE/Max Elite, ABR,GRI, CDPE, SFR) over 10 years ago
Great job in this post.  most people do not know what really moves mortgage rates.
Posted by Dave Cheatham (INC Financial ) over 10 years ago

I do think inflation is a fear, I don't think however we will hit a full on recession, so I see rates creeping up a bit more here, and probably settling in the upper 6s but maybe across the 7s.  Of course it will be a trading range.

If inflation turns out to be more tame, then we could be back to the mid 5s again.

 

Posted by Bryan Flynn, Central Mass and Worcester Mortgages (Regency Mortgage Corporation) over 10 years ago
Thanks Dave for the comment.  Its crazy how many mortgage professionals don't know that answer.
Posted by Bryan Flynn, Central Mass and Worcester Mortgages (Regency Mortgage Corporation) over 10 years ago
Bryan - There are so many people that do not have a clue how the mortgage market works. Most people hear the fed is dropping rates and it means the 30 year fixed is coming down. In many cases as you know the opposite occurs. The 10/1 arm seems like a great product right now for those that tend to be transient.
Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) over 10 years ago

Bill-the 10-1 right now is about the same has the 30 year fixed market.  Most of the lendera have almost a 3/4 of a point difference in the 5/1 to the 30 year fixed. Out of the last 10 of my clients 8 have gone with a 5/1 arm.  With the home prices in the metrowest area we are it is sometimes a 200-500 a month difference.  the clients need to be educated and on how the markets work.  and educated on what their total cost are over a 5 year period and then, they need to be in a monitorign program, so they can advantage of any positive changes like we had a couple weeks ago.  in a 2 hour window we put 10 client into 30 year fixes in at 5%.

Posted by Christopher Hills, Managing Dir. Lending over 10 years ago
Bill thanks for the feedback, when the term ARM is mentioned alot of client fear it these days, even if it is a savings.  I provide them with the options and my advice and let the client decide.
Posted by Bryan Flynn, Central Mass and Worcester Mortgages (Regency Mortgage Corporation) over 10 years ago

Chris,

 That was great time a month ago......some clients missed out on the rate drop 4 reprices that afternoon....crazy times, I actually got their permission to automatically lock them in if it happens again now.  Never did that before, it was a wake up call.

 Any word on the CMPS being okay for continuing education in MA...when licensing comes into effect.?

Posted by Bryan Flynn, Central Mass and Worcester Mortgages (Regency Mortgage Corporation) over 10 years ago
i have not heard anything about it yet on the cmps.  Mass will probably do something different like they always do.
Posted by Christopher Hills, Managing Dir. Lending over 10 years ago

Yes our state likes causing problems.  Wells Fargo pays up a flat fee now because of our regulations.  I had a loan that failed the predatory lending guidelines in MA because it was a FHA streamline and I paid all fees, saved the borrower 5/8 on rate, did not increase their loan amount.....but still failed and I had to cut a processing fee to pass it.....just insane.  On another note...rates are looking good today.  Lets hope bonds close at current levels....very bullish sign

Posted by Bryan Flynn, Central Mass and Worcester Mortgages (Regency Mortgage Corporation) over 10 years ago

How much is the ability to sell these loans on the secondary market effecting the rates?

Bonner

Posted by Bonner Thomason, CRS, ABR, GRI, e-Pro (Keller Williams Realty) over 10 years ago
Its not really effectinging the conforming rates.  Beacause that is based on mortgage backed securties(bonds).  However depending on the are you are in it is hurting the Jumbo market.  Many of the jumbo rates are now a full point above the standard 30 year fixed.  Wall street is treating jumbos like subprime, they dont' like it that is why they have been pushing fannie and freddie to increase loan limits.  At least in Mass, we are in a wait and see mode to see what the limits are.  I have seen speculation that they will be in the 500's somewhere. we will not know until March 7th.
Posted by Christopher Hills, Managing Dir. Lending over 10 years ago

Well said Chris,  Freddie had like a 3.558 billion dollar loss last quarter, so they have been extremely picky on loans they buy from lenders, I heard from an account rep that just in December in this area, fannie rejected 382 loans that now must stay on the lenders books.  Most of these lenders like to move the loans as quick as possible because there can be more costs involved.  So pricing offered by these lenders might become less competitive to cover their holding costs, Chris was right on, MBS are traded just like other bonds and supply and demand along with inflation drive the movement.

Posted by Bryan Flynn, Central Mass and Worcester Mortgages (Regency Mortgage Corporation) over 10 years ago
As Realtor I believe that all we do is watch the Fed anymore.  Hopefully we will have another cut.  Have a great day.
Posted by Michael Fowler, Broker, Owner Fowler Realty (Fowler Realty Quad Cities) over 10 years ago

Michael,  Fed cuts only control short term rates, ie. credit cards, home equity lines of credit, most of the time they have an inverse effect on long term rates.

Posted by Bryan Flynn, Central Mass and Worcester Mortgages (Regency Mortgage Corporation) over 10 years ago
Thanks for the info!
Posted by David Larson (Lancer Group Properties) over 10 years ago

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