The Market Giveth and Taketh Away

Refinance rates popped up again this week following the usual roller coster ride of 2008. The government takeover of Fannie/Freddie gave us a nice half point drop in rates a couple weeks ago, but that rate reduction was quickly absorbed by the announcement of a governmental 700 billion dollar proposal to buy up mostly bad mortgage debt from banks and investment firms.

Risk is rising, so the mortgage spread premium has risen in kind. Also putting a strain on refinance rates was the overnight rise in the 10 year treasury yield by over one quarter point!

There is a tremendous amount of economic news coming out, so it's difficult to tell which way the wind will blow regarding refinance rates, but one thing for sure... we will continue to see significant flucuations in mortgage rates.

The huge government bailout plan could end up being a wash for refinance rates, but overall, should be a tremendous help to stabilizing home prices. Let's hope that the plan also includes a loosening of the belt for Fannie and Freddie for home purchase financing.

Yes, underwriting guidelines should be tough enough to follow proper debt-to-income standards to make sure prospective homebuyers can afford thier new mortgage payments.... but ... current guidelines are excluding many, otherwise qualified homebuyer candidates from purchasing for lack of adequate cash to get in the door. A stabilized housing market will go a long way toward opening up new and less restrictive homebuyer mortgage programs.

May the Mortgage Rates be with You!

Refinance Tool Box

Refinance Rates Very Near Year's Lows

Mortgage refinance rates are very near the year's lows as the mortgage spread premium dropped about .35%, while the 10 year treasury yield continues it's descent.

Huge news with Lehman going under, Merrill taken over, and AIG liquidity issues have led to a flight to the safety of bonds, which is good for mortgage rates ... maybe not so good for the economy.

The government's takeover of Fannie and Freddie is playing a big part in the mortgage spread decline. As investors feel more secure in mortgage backed securities, the risk premium declines and mortgage refinance rates go down.

Housing numbers and values are still taking a beating, but at least we have one bit of good news on the inflation front. Oil has finally dipped below the $100 per barrel mark. This can go a long way toward curbing inflation and helping our economy.

These are in deed historic times on Wall Street and expect more wild flucutation in refinance rates. The good news now is that rates are low. The bad news is that property values are still suffering with no clear stabilization in sight.

The dwindling landscape of big investor money players such as Lehman and Merrill, along with fear of other big firms facing bankrupcty does not look good for near term investor confidence in the home finance markets.

If we have learned anything this year, it's to refinance on the dips. Today's low rates can be gone in a day. 10 year treasury yields can go up rather quickly, along with the mortgage risk premium in today's economic environment.

For those that are refinancing now or looking to refinance, now is a great time to lock while rates are low.

May the Mortgage Rates be with You!

Refinance Tool Box

Refinance Rates Down Big on Week

We experienced a very nice quick drop in refinance rates this week with the announcement that the U.S. Government will be taking over Fannie Mae and Freddie Mac. Rates dropped up to a 1/2 point in many mortgage programs!

The extreme drop in rates is very uncommon, in fact, we may have only experienced this rate action only a few times in history. Mortgage rates fell because the government stepped in to guarantee billions of dollars in outstanding mortgage-backed securities issued by Fannie and Freddie, making them instantly more desirable to investors.

While the 10-year treasury yield remained relatively constant, the mortgage risk-spread premium declined significantly. As investors bid up the price of mortgage-backed securities, that sent interest rates tumbling, with the average 30-year fixed rate falling below 6 percent for the first time since January, when rates stayed down only briefly.

A lot of people missed out on these rates the first time, but now have a second chance to cash-in on the lowest refinance rates in some time.

Will these rates last forever? Probably not. For those refinancing and sitting on the fence, now would be a great time to lock a rate. Rates have been extremely volitile this year and any major negative inflation, housing, or credit liquidity news could shoot refinance rates up again, and rather quickly.

May the Mortgage Rates be with You!

Refinance Tool Box