The Fed Funds Rate and Mortgage Rates

Okay, we’ll be talking later today about what the Fed does and what it means.   I thought I’d share a chart that a friend of mine, Dan Green, pointed out to me.   What does it mean for mortgage rates?   Plain and simple:

There is no direct link between mortgage rates and what the Fed controls.

Technorati Tags: Mortgage Rates, Fed Funds Rate, FOMC

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

Mortgage Rates

Quick update on what’s going on in the market today…….

Mortgage rates are quiet today on a mixed bag of news.    A couple of manufacturing reports came in in what you’d call the “Goldilocks range”  (not too hot, not too cold).    The dollar is rallying a bit and oil prices are down.     The market is somewhat treading water before the Fed’s meeting later this week.

I’ll have more as the day and the week progress, for now it’s steady as she goes……

Mortgage Rates Today…..

Well, we told you earlier that the retail sales report would probably push rates up.    Now that I’ve got today’s rates, here’s an overview of the changes from yesterday:

• 30 year Fixed under $417,000 – no change from yesterday.
• 15 year fixed under $417,000 – a minor increase.
• 30 year fixed over $417,000 – a minor increase
• 15 year fixed over $417,000 – a minor increase
• 30 year fixed FHA – a .125% increase in rates

So, rates didn’t jump as much as it appeared they would.    Why’s that?   The University of Michigan Consumer Sentiment Survey came in worse than expected.   The market had expected that it would come in the same as the last report but it dipped down.    Apparently consumers aren’t real confident that government policies will help the situation.

U.S. Consumer Sentiment declined in March.

U.S. consumer sentiment declined slightly in early March, with Americans less positive about the job outlook, a survey released Friday showed.

Shaun Curry | AFP | Getty Images

 

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The reading, however, stayed close to its six-month average, and was significantly above the year-ago level, according to Thomson Reuters/University of Michigan’s Surveys of Consumers.

The preliminary March reading for the surveys’ overall index on consumer sentiment was 72.5, down from 73.6 where it ended in February, and below the 73.6 forecast by analysts polled by Reuters.

In early March, consumers were expecting no change in the national rate of unemployment, which stands at 9.7 percent, for the rest of 2010, and were losing confidence in help from government economic policies.

"In recent months there has been a noticeable loss of confidence in current economic policies," Richard Curtin, director of the surveys, said in a statement.

So, the report was better than last year, which reinforces the “back from the brink of disaster” mentality.    But it’s hardly a glowing report.

That makes it more likely that the retail sales report for February was a “statistical anomaly” and not truly a sign of an improved market.    That took some pressure off rates for the morning.

Retail Sales Look Strong – puts pressure on mortgage rates?

Sales at U.S. retailers rose unexpectedly in February despite a drop in vehicle purchases and inclement weather that was expected to curtail shopping, according to a government report on Friday that bolstered hopes of a sustainable economic recovery.

The Commerce Department said total retail sales rose 0.3 percent as consumers bought an array of goods from necessities to luxury items. Sales for January were, however, revised down to only a gain of 0.1 percent from the previously reported 0.5 percent rise.

Analysts polled by Reuters had forecast retail sales slipping 0.2 percent last month. Compared to February last year, sales were 3.9 percent higher.

via Retail Sales Look Strong as Consumer Makes Comeback – CNBC.

This doesn’t bode well for mortgage rates…..

Why?   A couple of things:

• An increase in retail sales can mean an increase in the likelihood of inflation.
• An increase in retail sales can mean that the economy is turning around.
• Evidence that the economy is turning around can mean that the government is going to withdraw their subsidies of the financial markets sooner and that will send mortgage rates higher.

I’ll let you know what rates look like when I get them later this morning, but I expect them to be higher…….

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

This CPI Report could be good for interest rates

Core inflation (the number that isn’t as volatile because of things like energy prices), fell in January.   That shows that inflation isn’t an immediate threat and typically if that’s the ONLY thing that’s affecting the markets, that would put downward pressure on mortgage rates.   But remember, there’s a LOT more going on than just inflation right now.

I’ll have more as the day progresses…….

Consumer Prices Rise Slightly, Easing Inflation Fears – CNBC

U.S. consumer prices rose less than expected in January, while prices excluding food and energy fell for the first time since 1982, supporting the Federal Reserve’s contention it would keep its benchmark interest rate low for an “extended period.”

The Labor Department said on Friday its seasonally adjusted Consumer Price Index rose 0.2 percent last month, lifted by a spike in energy costs, after rising 0.2 percent in December.

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

Predictions on Mortgage Rates – Will the World Come to an End on March 31?

Carolyn Said of the San Francisco Chronicle wrote a good story yesterday taking a look at a number of the possible scenarios that might play out in terms of interest rates.    A couple of thoughts:

• I’m reminded of the saying, “What will you get if you line up 52 economists against the wall and ask them what color the sky is?”   Answer – 104 opinions.
• The fact that all of them predict that rates will go up is a pretty good indication that rates are not going to go down any time soon.

My prediction is that we’re going to see an increase in rates, but not a dramatic overnight rise in rates.    Instead we’re going to see a gradual and steady increase in rates.    Why not a major jump?   A couple of reasons:

• The Fed has been announcing that they were stopping their purchasing of mortgage backed securities the end of March for many months.   It’s not a surprise.
• Because it’s not a surprise, the reaction in the investment community will be more focused and analytical rather than a “knee jerk” reaction.

But remember, these are all just opinions……

Mortgage rates poised to jump as Fed cuts funds

The Federal Reserve is poised to turn off a major money spigot that has helped sustain the ailing real estate sector, as an extraordinary program under which the Fed has pumped $1.25 trillion into the mortgage market is slated to end March 31.

“Housing has been on government life support, and without it the crash would have been much more severe,” said Mark Zandi, chief economist with Moody’s Economy.com in Pennsylvania. “This spring and summer as those policy efforts unwind, we most likely will see mortgage rates move higher and more house-price declines.”

Technorati Tags: The Fed, Mortgage Rates

You know, 20 years ago, we didn't need Straight Talk in the mortgage world.   Everyone did the right thing and everything moved along......

Now we do.   Would you like to work with a lender who will tell it to you straight?    Would you like to have someone looking out for what's best for you?

Would you like to work with a lender who has to blog under a pen name - because their bank doesn't like what they are saying?

If so, call us at 330-536-3623 or send an e-mail to info@straighttalkaboutmortgages.com and we'll have one of our team of lenders get back to you, typically within 4 hours during normal week days.

Kenny H.

Mortgage Rates

continue to see upward pressure on them.    I’m heading off to a couple of appointments, but I’ll have more as soon I can.

In the mean time, recommendation remains to lock rather than float.

Tom Vanderwell
Technorati Tags: Mortgage Rates

Upward Pressure on Mortgage Rates…..

Bloomberg has the story about how the Treasury yield curve is steepening.     So what difference does that make?   A couple of quick points:

• It means that short term money is significantly cheaper than longer term money.   If you want to borrow for money for 2 years, it’s a lot cheaper than if you borrowed money for 10 years.
• The main reasons are the fear of inflation and the fear of the tsunami of debt that is going to be hitting the markets as the government needs to pay for all of the bailouts and the stimulus funding that they’ve had to do.
• It means that the financial markets are starting to take it seriously that the Fed is actually going to stop buying mortgage backed securities and that’s going to begin putting pressure on mortgage rates.

So, what does it mean for mortgage rates?  A couple of things:

• They probably won’t be going down.
• Barring any dramatic movements in the market, the overall trend will probably be a slow increase in rates, not a huge spike upward.

My recommendation – if you need a mortgage within the next 60 days, the odds are stacked against rates being cheaper in a month than they are now, so get it while you can.

Tom Vanderwell

Treasury Yield Curve Steepens to Record Amid Growth Outlook – Bloomberg.com

The Treasury yield curve, a barometer of the health of the U.S. economy, widened to a record as investors bet an accelerating recovery will fuel inflation and hurt demand for unprecedented sales of government debt.

The difference between 2- and 10-year Treasury note yields increased to 282 basis points before the government announces Dec. 23 how much it plans to auction in 2-, 5- and 7-year securities next week. It rose from 145 basis points at the beginning of the year, with the Federal Reserve anchoring its target rate at virtually zero and the U.S. extending the average maturity of its debt. A report tomorrow is forecast to show the world’s largest economy expanded in the third quarter.

Technorati Tags: Treasury Market, Mortgage Rates

Want some insights into where Rates Are going?

Every week, I’m a participant in Bankrate.com’s weekly Mortgage Rate Trend Index.  It’s a survey of many loan officers and those in the business and their opinions on what rates are going to do over the next 35 to 45 days.

Remember, those opinions might not be applicable for your individual situation.   Call me at (616) 292-7559, e-mail me at tvanderwell@straighttalkaboutmortgages.com or fill out that rate quote form on the right hand side and let’s discuss it.

Thanks!

Tom Vanderwell

December 16 – What the Fed Said

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