Archive for the ‘Rate Watch’ Category

RateWatch Videocast 22 July

Welcome to RateWatch for Thursday July 22, and here’s what’s happening:

Today’s market: The benchmark bond is down 15bps today.  We’re trading in a narrow channel.  It’s a huge day for economic news, with jobless claims coming out worse than expected – at least, worse than the experts expected – and existing home sales numbers showing the housing market still weak but not as weak as expected. All that bad economic news is bad for stocks and good for bonds.

What that means to you is worse mortgage rates, but not very much worse.  We’d need to be down 30-40 bps before banks would react with worse rates.  There’s a certain fatigue on the part of banks, who don’t really want to make loans in the low 4% range, so they’re not going lower on rates unless we have a huge move in the market.  That’s not happening.  Moves higher are very possible, however, so stay tuned.  To you all this means that rates are holding steady in the 4.5% range on most loans, down in the 4% range on 15-year terms.  Those rates are truly ridiculous, by the way.  At 4.5%, you can buy 20% more house than you can at 6% for the same payment.  An example:

6%, $200,000 loan, payment $1200/mo

4.5%, $240,000 loan, payment $1216/mo

So let’s all be grateful.

What’s in it for you? Money.  It’s going to take you 60-90 days to be able to complete a sale, so start the process right now.  For many of you it will take as much as six months.  Sound like a lot?  It isn’t.  And January is traditionally one of the cheapest times of the year to pull the trigger.  Do not wait to talk to a professional.  You can call us.  That’s what we’re here for.

That’s RateWatch for July 22, I’m your host, Chris Jones.  You can find us at or text us at 801-850-3781. ‘Til next time, we’ll be watching the rates.

A Brand-New RateWatch

So I made RateWatch a videocast.  Approximate text is below.  But I beg you – send me an email ( or make a comment and let me know what you think.  Good idea?  Good idea but bad execution?  You don’t have to be gentle.

Let’s get to it.

MARKET: the market is down a bit today, off about 25 basis points.  For those just joining us – hey there, Tyler, Corrine, and Taylor – what that means is that the bond we track, the FNMA 4.5% 30-year bond – is being sold off and its price is declining.  It also means that the yield on that bond is rising.  Since lenders hedge their lending by buying those bonds, when the yields on them rise, mortgage rates rise with them.  So today mortgage rates are increasing.  Not very much, but a little.  More than we’ve seen in a month.

ANALYSIS: Markets rise and markets fall.  The big news over the past few weeks has been the increasing probability that we’ll see a market slump over the last half of the year and into next year.  There is also a real fear that next year could be truly ugly.  With the Bush tax cuts sunsetting on January 1, businesses will be moving their cashflow into the latter half of this year to avoid the explosive tax increase.  Dividend taxes nearly triple, which will be terrible for pension funds, and every single tax bracket will see tax increases.

Anyone that thinks that won’t have a huge negative impact on economic growth is not a serious person.  There is a chance – really, a pretty good one – that Congress will do something about an extension for part of the cuts, especially those that will have the smallest economic, but largest political, impact.  As of this moment, however, it doesn’t seem a good time to invest in stocks.  Bonds, as a result, have been flourishing, driving interest rates to 4.5% and even lower on some programs.

ACTION: We may have hit the bottom of this trench in mortgage rates.  Those of you that have been thinking now might be a good time to buy, now might be a good time to buy.  For refinances, I’m willing to go out on a limb and say it’s now or never.

Until next time, we’ll keep up the RateWatch.


RateWatch Cinco de Mayo – As I said before…

Markets: Bonds are up again today, up about 18bps (which is .18), and that puts us right on the lows of the year.  Rates have not responded quite as exuberantly, but we’re touching 5% again.  Even lower on some programs.

Analysis: Rates are sticky down, meaning that they stick on the way lower and don’t mirror market conditions exactly.  They are also slippery up, meaning that they rise faster than you would think when the market deteriorates.  I think that might explain the hysteria about interest rates, with everyone and their dog predicting a gigantic surge in rates when the Fed stopped buying mortgage-backed securities at the end of March.

Okay, not everyone.  As you know, faithful readers, I predicted that rates would not go higher, at least not by much.  And for once, I was right.  It just didn’t seem rational to me that with the global debt overhang we would have a massive flight out of mortgage-backed securities causing a huge rise in interest rates.  It has, in fact, not happened.  Rates remain in the range they have been for 18 months.

Additionally, there isn’t going to be any significant fallout – not for the next few months – from the expiration of the tax credit for homebuyers.  The market will adjust.  There was an extra $8k built into pricing on homes, which will now slowly vanish, and lower prices will start pulling the same buyers back into the market.  Not all of them, of course, because many of them were getting an $8000 “gift” from mom and dad that they were going to pay back from their government largesse, and that is gone.  But there will be other incentives.  The market wants to move.  Real estate wants to move.  And it will.

Action: if you’re in the market, stay there.  We’re about to see the best prices for houses and the best rates we’ve seen in many years.  Get with us, get into the PerfectHome program, and we guarantee when you find the house you want to buy, you’ll be able to buy it.  That’s right.  We guarantee it.


RateWatch ALERT – “Good” Friday

Markets: It’s a good thing it’s a short trading session today, because bonds are getting massacred.  That continues the trend for the week that has seen us lose over 100bps, pushing rates above 5.25% this morning.

Analysis: Good employment data – we actually have seen some hiring in this report – makes it look more and more likely that the bottom of the recession has come and perhaps gone.  Couple that with looming $3 trillion deficits, and that means that bonds are doomed.  This time, there’s no Fed backstopping things.

So, it turns out that I was wrong, and that the end of the Fed purchases of mortgage-backed securities IS going to have a hugely negative impact on interest rates, as the conventional wisdom said it would.

Action: The only thing to do is to move as quickly as possible.  If you are considering a real-estate transaction (the government goosing of the housing market comes to an end on April 30, FYI), move now.  Nobody can lock your rate without an address, so get a contract in place as soon as you can.

Despite my small joke in the headline, I do know that there’s nothing in the housing markets that is anything like as important as the real events being commemorated this weekend, beginning today with Good Friday and culminating with Easter on Sunday morning.  I recall singing at many Easter sunrise services as a teenager, and the power of the commemoration of the Resurrection is with me as I write this.  RateWatch is about how important the market is, but all things considered, nothing that happens in the market is very important at all.  Take some time this weekend to appreciate how insignificant all this really is compared to the things that really matter.  I know I will.


RateWatch ALERT – March 24

Market: We’re off 90bps, meaning that we’ve lost almost a whole point in price on the benchmark 4.5% 30-year FNMA bond. That means rate pricing is off by just about that same amount, and 5% is on the ragged edge of no good anymore.  Most lenders will be pricing at 5.25% in the morning.
Analysis: We did have some good economic news this morning, with durable goods orders excluding transportation up by .9% (consensus was for a .6% increase).  Of course, durable goods including transportation was up by only .5%, versus a consensus of .9%, so that wasn’t rosy; apparently transportation is still in the soup. But then, we lost .34 right off the open and it’s gotten worse every tick since all day.  Markets were looking for a reason to sell.
They were looking for a reason because the Health Care monstrosity is projected to increase the federal deficit by $800 billion (roughly 80% more than it is now).  That means the fed prints more money, which means inflation, which means bonds are a bad investment, which means rates are headed higher.  Thank your Congressman, if he’s a Democrat.  As you might have heard, every single Republican in Congress voted against the thing, which is itself an Easter Miracle.
What this further means is that when tomorrow’s employment numbers come in crappy, nobody is going to care.  Rates are headed higher, and the Fed purchase of mortgage-backed securities has nothing to do with it.  This is a political problem.
Action: If you want the tax credit for buying a home, find a house RIGHT NOW.
Chris Jones
City 1st Mortgage Services