Posted in General on March 5th, 2008 at 1:24 PM
Understanding What Causes Interest Rate Movement
The Federal Reserve constantly evaluates the US economy and, when necessary, takes steps to address inflationary concerns and avoid economic recession or depression. The mass media, in turn, reacts by providing a wide range of opinions and interpretations of the Fed's monetary policy. This can make it very difficult for consumers to decipher how such actions will influence interest rates in general and mortgages in particular.
And although actions of the Federal Reserve can have a direct impact on the Prime rate, mortgage interest rates are dictated by the trading of mortgage-backed securities, which are similar to bonds and trade on a daily basis. This means that the real dynamic at the heart of interest rate movement is the competitive relationship between stocks and bonds.
Stocks, bonds, and mortgage-backed securities compete for the same investment dollars on a daily basis. There is literally only so much money to be invested. When the Federal Reserve feels that interest rates need to be decreased in an effort to stimulate the economy, this reduction in rates can often cause a stock market rally. When the market becomes bullish, the money to invest in stocks comes from the selling off of other investments, including mortgage-backed securities.
Unfortunately, when mortgage-backed securities are sold off to fuel stock market rallies, this causes interest rates to go up, not down.
Historically, there have been many instances where the Federal Reserve has increased interest rates, arousing fears that corporate profit margins would be affected. This resulted in stocks being sold off, leading money managers to search for a place to invest their newly liquidated assets until the next market rally. One such safe haven has been mortgage-backed securities, which cause mortgage rates to drop.
The daily ebb and flow of money is what matters most when it comes to the movement of mortgage interest rates. I make it a point to continuously monitor interest rates for my clients and advise them of opportunities to manage their mortgage debt at a better rate. This is the foundation of my business model as a trusted advisor.
If media reports have led you to second guess whether it's a good time to purchase a new home, give me a call. We'll analyze your financial situation together and create a plan that's right for you.
Posted in General on February 8th, 2008 at 2:27 PM
Stimulus Package Passes Senate: What Now?
With an 81 to 16 vote, the Senate passed an amended version of H.R. 5140, a $150 billion plan to jumpstart the economy with temporary tax breaks for consumers and businesses, extended benefits, and most importantly, two provisions designed to assist the housing market. According to CNN, the House is expected to consider and pass the amended bill as early as tonight, which could put the bill on the President’s desk as early as Friday. The bill temporarily increased the size of loans that may be purchased by Fannie Mae and Freddie Mac, raising the current level of $417,000 to reportedly up to $730,000 in the highest cost regions of the housing markets. The bill also increases the size of loans the Federal Housing Administration could insure.If you have a loan or loans totaling more than $417,000 on your home, you owe it to yourself to find out if today's low market rates and the provisions of the stimuls package will allow you to substantially lower your cost of borrowing and/or secure a fixed rate.
Posted in General on January 31st, 2008 at 8:49 AM
The Federal Open Market Committee (FOMC) is scheduled to meet again this week and it's predicted that rates will be cut again. It's commonly thought that a cut in interest rates by the FOMC brings with it a decline in home mortgage rates. This is not always true.
If you are considering obtaining a new loan, the time to pick up the phone is now.
Historically, the time to make an application to capture the best rate may be before an FOMC meeting, not after. While it's true that mortgage rates may improve immediately following a rate cut, they can just as quickly get worse. I don’t want you to lose out by playing the waiting game.
Why do home loan rates often rise following rate cuts by the FOMC? The reason is that Fed rate cuts can be seen as inflationary and bond traders hate inflation. And it is the bond market that sets long-term interest rates.
After two recent FOMC meetings, interest rates rose significantly after a rate cut. First when rates were cut in September of 2007 and then again following the inter-session emergency meeting in January 2008. In each case the price of bonds deteriorated quickly and in the span of two days, interest rates increased up to .75% off of their low points.
If you would like to know how you could benefit from refinancing or are in the process of buying a new home, make sure you have your application in process. This way, you can capture the best interest rate when it is available. If you wait, you may cost yourself the best chance to have the lowest rate.
Call me today for a FREE evaluation of your home loan. Not calling me could cost you hundreds of dollars each month. |
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Posted in General on January 31st, 2008 at 8:46 AM
Fed Surprises with Deepest Cut since 1984 The Federal Reserve surprised everyone Tuesday with an emergency intersession rate cut of .75%, the deepest cut in the Fed Funds Rate since 1984. The Fed Governors are acting in direct response to recent reports that the country is on the brink of recession. If you have credit cards, auto loans, HELOCs, or an Adjustable Rate Mortgage, the Fed's decision to cut this key interest rate is great news. For long-term mortgage rates however, this could signal the beginning of the end for the lowest 30-year home loan rate borrowers have experienced since 2005. Let's look at the impact of a few recent Fed Funds Rate cuts and the corresponding impact to home loan rates to see what this could mean for you: 
Rates are predicted to be cut again when the Federal Reserve meets at the end of this month. Many believe Tuesday's action was taken because of a dramatic downturn in the stock market, where the Dow dropped 464 points, the worst single day drop since September 11, 2001. Since the Fed's announcement, the Dow has recovered much of those losses but volatility is likely to remain a consistent theme throughout the week.
If you are waiting for long-term mortgage rates to fall further from here, don't count on it. Your best chance to lock in the lowest mortgage rates since 2005 is now. Getting your application in process will allow you to capture a rate near all time lows and, with many experts predicting home values could continue to decline, waiting could kill your chance to capture a great rate if your home doesn't appraise. This is an unprecedented market and things are moving fast. Regardless of your current mortgage, please give me a call so that we can review your current financial situation in light of these market movements. Call today to discuss how I may assist you. Not calling today could cost you tens of thousands of dollars in the next few years. Don't let this happen. I look forward to hearing from you. |
Posted in General on January 17th, 2008 at 11:40 AM
Good News for Mortgage Insurance Premiums!
Premiums for qualified mortgage insurance on debt you took out in order to acquire, construct or improve your first or second residence can potentially be treated as deductible mortgage interest. Before the Mortgage Relief Act, this break was only available for premium amounts paid during 2007. The new law extends the break for three more years, through 2010.
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