Mortgage rates: we’re at now, now.
2010 has been an interesting year for mortgage rates to say the least. The expectation that interest rates would jump in a post-Fed-involvement environment never came to fruition, and recent economic and global events have worked to push rates further the other way. As a result, we’re looking at mortgage rates hitting unprecedented lows. In fact, the often fantasized 4.500% 30yr fixed is in play…..even 4.375% for some borrowers.
So what should a prospective homebuyer or current homeowner do? Two pieces of advice:
1) If you have a mortgage, look into refinancing…immediately. Even if you think your home is “under water” or you might not qualify – get in, have us look at your overall financial picture, and take advantage of a remarkable interest rate window.
2) Don’t wait. Don’t worry about the past, about what your credit score used to be, about what your home used to be worth, or could-a, would-a, should-a. This is now, now. And like Colonel Sandurz told Dark Helmet, “everything that’s happening now is happening now.” There is an incredible circumstance for homebuyers and current homeowners; rates in the low 4’s are here, but not for long. We know one thing for an absolute certainty; rates will go up. We don’t know when, or by how much, but rates will increase.
But don’t worry about then, your opportunity is now.
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Nick Mallory is an active loan officer in Portland, Oregon. Have any questions or comments about this post? Visit the contact page and drop Nick a line.
The Fed exits the MBS market as loan officers everywhere begin holding their breath.
Towards the end of 2008, in an effort to spur the housing market the Federal Reserve began buying Mortgage Backed Securities (MBS or “mortgage bonds”). Since mortgage rates are derived from MBS, the Fed figured they could keep mortgage rates artificially low by manipulating the prices of those bonds.
Like a teenager with their parent’s credit card, the Fed bought, and bought, and bought mortgage bonds ($1.25 Trillion to be exact) while mortgage rates steadily dropped to levels not seen in 60 years. In short, the plan worked beautifully.
But the plan had to end.
On March 31st the Federal Reserve stopped their purchase program, and mortgage professionals across the country began nervously watching the market to see how rates would react. A clear-cut debate raged on in the months prior to the March 31st deadline; would rates slowly trickle up, or violently spike once the Fed left the market?
Interestingly enough both sides were right….for now.
In the 48hrs after March 31st, interest rates jumped between 0.25% and 0.375%. Since that time, however, rates have trickled back down. The long term effects of the Fed leaving the MBS market truly remain to be seen.
Although, not everybody is predicting an immediate and drastic rate jump.
In an article published March 30th at Bloomberg.com (the day before the Fed’s program ended), columnist Kathleen Howley suggested that low mortgage rates could stick around for some time as institutional investors (banks & pension funds) replace the Fed’s MBS buying efforts. Also noted is the fact that the Fed could jump back into the MBS-buying game if higher rates cause the housing market to backslide.
So…..will rates jump up, or simply bump up? In the end nobody knows for sure – but I for one remain optimistic that rates will stay relatively low in the face of the Fed taking their ball and going home. After all, the alternative scenario doesn’t seem so pretty.
Rates aside, if you’re looking to get in to the market (either by purchase or refinance), now is your time. Rates are still phenomenal, home prices are low (for now), and there’s still time to cash-in on the tax credit for buyers. Better to act now as the light dims on these government programs, than to wait around for a deal that may never come around again.
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Nick Mallory is an active loan officer in Portland, Oregon. Have any questions or comments about this post? Visit the contact page and drop Nick a line.
The above video was created by my partner-in-crime over at edgevolution; Dustin Hughes. The concept of following Dave (a fictional borrower) through the process of buying a home came up during a brainstorming session, and Dustin brilliantly put the idea to video.
This video is a perfect example of the stuff we do here at The Lending Journal and at edgevolution – highly visual and concrete depictions of complex lending topics. If you like this video check out more at www.edgevolution.com, and stay tuned … the story of Dave is far from over.
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Nick Mallory is an active loan officer in Portland, Oregon. Have any questions or comments about this post? Visit the contact page and drop Nick a line.
Shortly after building and launching The Lending Journal, my boss/mentor/coach Dustin Hughes and I started edgevolution.com, a company focused
on developing dynamic, highly visual content for the lending industry. Armed with these two platforms (thelendingjournal.com and edgevolution.com), Dustin and I set out to make an impact on the industry, and to bring alive the vision of edgevolution – making being a mortgage lender cool again.
This vision caught a giant boost a few days ago with some nationwide exposure thanks to the folks at Mortgage Success Source (MSS) and Mortgage Market Guide (MMG).
Dustin and I developed a video via edgevolution for MMG; a 7min narration entitled “How Interest Rates Move.” The video covers the intra-day movements of mortgage rates – how and why they happen – and some recent efforts by the Federal Reserve to hold interest rates artificially low.
The video was a hit with MSS and MMG, and they recorded a 15min interview with Dustin and I where we discussed our approach, the idea for the video, and why we decided to release it to the MMG membership (if you’d like to listen to the interview, shoot me a note). The video and interview was then released across their nationwide network of member loan officers, and the resulting traffic to The Lending Journal and edgevolution has been phenomenal.
So take a look and let us know what you think. Also, feel free to check out Mortgage Market Guide, edgevolution (also on facebook and twitter), and some other videos on our edgevolution YouTube channel.
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Nick Mallory is an active loan officer in Portland, Oregon. Have any questions or comments about this post? Visit the contact page and drop Nick a line.
Four HUGE reasons to buy or refi RIGHT NOW!
With the economy rebounding (albeit slowly), and housing markets coming to life (hopefully), many borrowers are choosing to 
sit on the sidelines and wait out the final convulsions of the credit crisis/mortgage bubble/housing slump. Strategically speaking, is this the right decision? Is it better to adopt a wait-it-out mentality, and make a move after we’re on the road to a full and complete recovery?
In a word….no.
Why is it a good idea to jump off the fence and purchase or refinance right now? Well, there’s a good reason for that…in fact, there are FOUR huge reasons to purchase or refinance right now.
Reason #1: The Fed is taking their ball and going home.
The Federal Reserve has been purchasing mortgage bonds over the past year, all in an effort to keep mortgage rates low and help spur the housing market. Know what? It’s worked…beautifully in fact. However, this mortgage bond purchase program comes to an end March 31st and there is an enormous amount of speculation in the lending industry surrounding how rates will respond come April 1st (ironic date eh?). Some think rates will bump up 0.50%, while others see an immediate 1%+ jump into the low to mid-6’s.
What will happen? We don’t know. What we do know is that rates will begin to rise sometime after that cutoff date, making now the perfect time to capitalize on an artificially low interest rate environment for would-be purchasers and refinancers.
Reason #2: No more free money.
The home-buyer tax credit for first timers and current owners ($8,000 and $6,500 respectively) will expire on April 30th (you need to be under contract by then to qualify for the credit), and as of 2/10/2010 the IRS has released no word on whether or not it will extend the program. Anyone looking to capitalize should speak with their Lender and Realtor immediately. Don’t have a Lender or Realtor? Feel free to contact me – I’m an active loan officer lending in OR/WA/CA and would be happy to help.
Continue reading the rest of this article…