Mortgage Rate Report – February end of Month Update

I have not updated this post because over the past week and a half it has been a wild, wild ride. To put it in brief – interest rates have been rising and rising and rising! That trend continued to repeat over the past two to three weeks. So let’s get right to it – Why did this happen? Didn’t you begin this month with constant news that the FED cut rates and they are going down??

Yes, you did. As in my previous post the Fed Funding rate went down, and very probable to go down again. But what the news always fails to provide to the average consumer is the fact that mortgage interest rates almost always go in the opposite direction. Now over the past weeks not only did the interest rates rise, they rose a full 1% from the time period just before the Fed announcement. The Good News … What Goes up MUST COME DOWN!!!

 

Quick recap: February 13, 2008

As you know that the President signed the Stimulus Package on Wednesday, February 13th. Next, the release of Retail Sales Report led to deteriorated pricing and the volatility continued throughout the week!

The week’s Consumer Sentiment Report wasn’t too bad, translating into healthier corporate profits for the Stock Market and slightly higher Stock Prices. Couple this with passage of the (i) Economic Stimulus Package, (ii) Warren Buffett’s statements on helping insure municipal bonds and suddenly it appears there’s more economic health on Wall Street than previous months have dictated. What does all of this mean? The Stock Market outperformed the Bond Market this week. This meant higher interest rate pricing.

 

Quick recap: February 19, 2008

This week released Housing and inflation reports which meant increased market volatility. Not much of a surprise that lenders repriced interest rates through-out the trading day. Just when you thought mortgage rates might level off or head down, inflation pulls them back up. Well, some of them, anyway.

The benchmark 30-year fixed-rate mortgage rose for the fourth week in a row. It went up 1 basis point, to 6.57 percent, according to the Bankrate.com Rates on long-term mortgages would have dropped this week if not for the release Wednesday morning of the consumer price index for March. Core prices rose faster than Wall Street had been expecting, so long-term interest rates went up, too. But short-term mortgages fell on the news that the Fed might soon stop raising short-term interest rates.

 

Quick recap: February 25, 2008

Perhaps there is support from weak economic data, but even in the face of dismal inflation data, MBS are holding steady on the day.

This week data is actually trading up in positive direction which is truly amazing considering we’ve received some of the worst inflation numbers in over 20 years. The core Producer Price Index came in at .4%, double the expectation of 2%. This should have destroyed rates this morning, but it hasn’t. There are a couple mitigating factors.

The economy is obviously weakening hourly with more companies releasing bad earnings, a weak consumer, and a weak housing market.

Combine this with the somewhat exuberant and emotional sell-off yesterday and MBSs have a weapon with which to fight inflation today. Unfortunately, the inflation news is not good for bonds in the long run, but it is encouraging to see them holding their ground despite such a forceful blow.

In breaking news, as this is being written (and before major news outlets will get you this info), Consumer Confidence Numbers were just released at a five year low! This should help mortgage rates for the rest of the morning.

Stay Tuned … things are changing rapidly… check back for more updates!

Wilshire Weekly Mortgage Rate Update February 4, 2008

Where We’ve been:
Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading was volatile with most of the positive improvements coming early in the week. The anticipated Fed rate cut and mixed economic data sent bonds up and down the latter portion of the week. Unemployment was stronger than expected @ 4.9%, however payrolls fell 17,000. Stocks continued to bounce back posting additional gains following the Fed 50 basis point rate cut. Unfortunately this caused the demand for mortgage bonds to languish.

Where We’re At:
The good news is that despite the weaker demand the latter portion of the week, for the week, interest rates on government and conventional loans fell by about 3/8 of a discount point. The productivity data Wednesday will be the most important event this week. Factory orders and the Treasury auctions also have the real potential to cause mortgage interest rate volatility.

Where we’re Going:
Despite continued Fed rate decreases, the future of the US economy remains uncertain. The Fed is desperately trying to jumpstart the economy amid high commodities prices and the fear of inflation. Former Fed chairman Greenspan indicated last week that the Fed’s actions probably wouldn’t keep the economy out of recession. Usually economic weakness is good for bonds and bad for stocks. Unfortunately the bond market has been hit hard recently by huge losses from bond insurers and many investors fear the worst is yet to come.

Keep in mind that a Fed rate cut does not automatically mean mortgage interest rates will improve, as was evident following the last few Fed rate cuts. The Federal Reserve has direct control over the level of short-term interest rates. The Fed’s influence over longer-term interest rates is less certain. Former Fed chairman Greenspan hit upon this fact last week when he noted, “central banks have less and less power to influence long term rates.” Remember that the Fed cuts rates to help spur the economy. Usually funds exit bond holdings and enter stocks. This was exactly what happened over the past two weeks. Bonds fell pushing rates higher following the Fed rate cuts, while stocks showed strong gains.

Forecast:
The good news is that interest rates still remain very favorable. There is a very real possibility that longer-term mortgage interest rates could head lower if inflation fears subside and the economic weakness continues. However, lower rates are not a given. High commodities prices and liquidity concerns in the mortgage industry continue to weigh heavily upon the economy. Couple those concerns with reports of continued housing price declines and the short-term economic outlook looks dim.

Mortgage interest rates remain historically favorable and taking advantage of rates at these levels to lock in a low interest rate for years to come would be prudent. If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… This is only an opinion of what one may do if financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

FED’s 1st Emergency Rate Cut Since 2001… is just in time!

We live in interesting, interesting times…

On Monday, January 21, 2007, there came a global stock sell-off fanned by increased fears of a recession. Confronted with these events The Federal Reserve cut a key interest rate by three-quarters of a percentage point on Tuesday, the biggest one-day move by the central bank in recent memory. Also, the first time to cut rates between meetings since the 2001 – 9/11 attacks!

The FED felt the pressure and called an emergency video conference meeting Monday night. This meeting was called after a global financial markets sunk throughout the day as the rest of the world feared that the largest global economy could be heading toward a recession. (And I have a hunch that this prompted Bush to put in a call to Big Ben to start dialing up the officials to take action).

The Action:
The reduction in the federal funds rate from 4.25 percent down to 3.5 percent marked the biggest reduction in this target rate for overnight loans on records going back to 1990. the Federal Reserve cut its overnight lending rate by 75 basis points to 3.50%,

The Effect:
Although catching the banks by surprise by making this early move, Wallstreet still began down, but did recover a bit. Globally, Japan’s Nikkei had its beggest decline in nearly 10 years, Australia’s benchmarj index sank 7% and Hong Koing”s key averahe finished 8.7 percent after a more than 5 % drop Monday.

Where Do We go From Here:
All in all, this is predictable. Remember media coverage is meant to be entertaining. What I don’t like is causing panic. Lets be honest, Stocks in Dow have frequent 3 digit drops, and with a stream of weak economic data & reports of financial firms losing billions (Bank of America the latest), all pointing to the housing market this FED cut will not change things over night. This is good, because the lower cost of money will increase its demand for it. However, just as housing will take some time to recover, so will this volatile market. It can take months for an interest rate cut to work its way through the economy. In the short term, it makes borrowing cheaper, but the billions of dollars in failed mortgages over the past year have made lenders wary of writing loans to almost anyone – consumers or corporations. And the heavy losses that banks and other financial institutions have suffered have raised questions about their stability.

No one expected an interest rate cut alone to erase investors’ concerns. For the market to truly gain a foothold, investors need to see strong economic data in the coming weeks and solid earnings reports and forecasts this week from big multinational companies like Microsoft Corp., AT&T Inc., Caterpillar Inc. and Honeywell International Inc.

Light At The End of The Tunnel:
As Larry Kudlow states in his blog, “We may be closer to a stock market bottom than many believe. This correction is already about 20 percent. There are a lot of great stock market bargain values. Smart investors always look to the long-run. Don’t worry about timing anything. The world is not coming to an end. Our free-market capitalist system goes through periodic corrections and cleansings. It’s the natural order of things. Things are going to be okay.” {The Fed Got It Right}

If I were considering financing/refinancing a home, my recommendation would be to Lock if my closing was taking place within 7 days. This is only my opinion and can never guarantee, especially in this daily market volatility. And the FED aren’t done yet, there is a 54% chance there will be another rate cut at the scheduled meeting next week, so check back at The Property Tip for the updates!

Wilshire Weekly Mortgage Rate Update January 21, 2008

Where We’ve been:
Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading was volatile following mixed data. The consumer price index rose slightly higher than expected, consumer sentiment data came in strong, and the Fed “Beige Book” showed increased activity in 7 of 12 districts. However, core inflation readings were as expected and the Fed Chairman urged legislators to quickly implement a stimulus package to avoid a recession.

Where We’re At:
For the week, interest rates on government and conventional loans fell by about 1/4 of a discount point.

There is no significant data this week. Market participants will likely look to stocks and oil prices for trading direction. In addition, any developments of a government stimulus package to stimulate the economy may lead to mortgage interest rate volatility.

Where we’re Going:
The housing market across the country has been a vital component in sustaining the economy in recent years. Homeowners generally saw an increase in the value of their homes.

Unfortunately now that has all changed. The recent softening of the housing market tied to credit concerns has many analysts worried. Most economists believe the economy is heading toward a recession while many believe we are already in a recession.

Fed Chairman Bernanke recently urged lawmakers to implement a stimulus package to help the economy and homeowners. Bernanke stated, “To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next twelve months or so.”

Forecast:
There is still uncertainty regarding the future state of the economy. Mortgage bonds have improved recently however further improvements are not a given considering high energy costs are adding inflationary concerns.

The good news is that mortgage interest rates remain historically low. A cautious approach to mortgage interest rate decisions is necessary to protect against future volatility. If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days…

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

Wilshire Weekly Mortgage Rate Update January 15, 2008

Where We’ve been:
Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading was within a relatively narrow range. There were very few data releases. Stocks dominated the financial markets as news of continued economic uncertainty tied to the credit crunch dominated the headlines. There remained concerns that the economy is heading into a recession.

Where We’re At:
For the week, interest rates on government and conventional loans fell by about 1/8 of a discount point.

Consumer price index data Wednesday will be the most important event this week. With an abundance of additional important data releases scheduled the potential for market volatility is high.

Where we’re Going:
The abundance of fundamental data this week provides a good opportunity for mortgages to improve. If the data shows weakness in the economy with little or no inflationary pressures then it is possible for mortgage bonds to rally resulting in mortgage interest rate decreases. However, if the data shows that the economy is rebounding or any significant signs of inflation, mortgage bonds may fall pushing mortgage interest rates higher.

Forecast: Mortgage interest rates remain favorable. Now is a great time to avoid the uncertainty surrounding continued market volatility so locking in your rates for security in closing within the next week.