Archive for the ‘Interest Rates’ Category

Mortgage rates all over the place

March 17, 2020

Based on the amount of calls and emails I’ve received, most of you know mortgage rates moved to historic lows in March. Rates also shot up about a full point during the middle of the month only to gain some ground back the following week.

What we are experiencing as a society with Covid-19 is unbelievable. All of us are being impacted in some way. There is enough commentary out there, so this blog will stick with what it tries to do best – impacts on the mortgage industry. Some of us are sick of the roller coaster ride with the markets.

Can we get off of this ride?!?

Again, it’s no secret rates are better. The mortgage industry is at an unprecedented level of refinancing home loans. This heavy loan volume is causing underwriting times to get longer than normal. Although purchase loans are not impacted as they get special access to an underwriter. Why? Purchase loans involve moving trucks and refinances do not. Purchases get priority.

So what is moving the markets? Well, it is a lot of things actually.

  • Covid-19: This is the easiest one to focus on because of the disruption to the economy of the world. Bad economic news is usually good news for mortgage rates. This is no exception. Covid-19 pushed stocks off of their all-time highs, and all of this money flowed into bonds pushing mortgage rates lower.
  • Covid-19 trend before cases in the US: International money flowed into US bonds in late 2019 and early 2020 as from an international stand point, there were fears of an economic slow-down. International investors began buying up our bonds and pushing rates slightly down. So the impact of Covid-19, while dramatic during March, was in play for the past several months.
  • Oil Wars: Saudi Arabia and Russia took off the gloves and went at each other. Russian didn’t want to cut back production to try and stabilize oil prices. Instead, Russia wants oil prices to go lower to hurt the US Shale industry (which needs higher oil prices to remain profitable). Since Russia decided to not play nice, Saudi Arabia is flooding the market with oil to gain back market share. Oil prices plunged. Part of the 2,000 point drop of the Dow on 3/9 was the start of the oil wars within OPEC.
  • The Federal Reserve: During the month of March, the Fed cut the Federal Funds rate to zero. With the Feds dramatically lowering rates, many people thought this would directly translate to mortgage rates. So far, it has not. The Federal Funds Rate lowers second mortgages/home equity lines. Mortgages rates are still determined by bond movement. When the Fed lowered rates the first time, mortgage rates actually increased. The second time mortgage rates improved from the previous week. Not because the Fed lowered rates but due to the Fed’s pledge to purchase bonds (specifically mortgage backed security bonds). Mortgage rates improved some after this announcement.

Where are as of this post? Mortgage rates are still low, but not as low as they have been over the past few weeks. Why?

  • Part of this is bond yields improving from their historic low (making mortgage rates worse).
  • Another part is rates were at historic lows in March; meaning, there is way more room for rates to get worse than better.
  • Lastly, the industry is pretty much at capacity and cannot handle more loan volume; meaning, banks are not being as aggressive with mortgage rates as they have more business than they can handle.

Where do we go from here? Who knows! Expect mortgage rates to stay low during market uncertainty, and the market is anything but “stable” right now! I also expect rates will improve back to where they were before the week of March 9th when rates unexpectedly got much worse. Beyond being back to historic low levels, I am not sure rates would improve much more unless things got exceedingly worse with the economy and/or the capacity issue within the mortgage industry subsides.

I am currently advising my clients if they are happy with the rate and the numbers make sense, let’s get going! It is much easier for mortgage rates to get worse than better given where rates currently sit. If unhappy, I am setting target rates to contact clients if/when rates move lower and it makes more sense to refinance.

Looking to refinance while rates are super low? If the home is in the state of Georgia, contact me today. In a short phone call, we can determine if the numbers make sense to refinance today, and if not, set a target rate for when rates improve.

Mortgage Interest Rates Continue Falling

February 18, 2020

Mortgage rates – already at near historic lows – continue to improve.  Current interest rates are basically a full percentage point lower than this time last year.  I’ve recently locked clients into rates lower than I’ve ever had the privilege of doing in my entire career as a loan officer.    

What factors allow rates to continue improving?  One key component is the continuing spread of Coronavirus and the fears related to this public health concern.  In times of fear and uncertainty, investors typically move money to less-risky investments.  Given the fear and uncertainty related to coronavirus, investors have recently been doing this very thing.  Investors have been putting more money into US government bonds.  This drives bond prices up and interest rates down.  The US 10 Year bond trended upward from August 2019 until December.  Since then, the interest rate on this bond has moved consistently downward.

Investors consider mortgage backed securities to have a risk profile similar to US government bonds, so mortgage interest rates have declined along with rates on government bonds.  So mortgage rates now sit very close to historic lows.

How long will these low rates last?  That requires a crystal ball and I don’t have one.  If health officials can control the coronavirus spread and ease public concerns, perhaps rates will start moving higher again.  But looming over the entire situation is the 2020 Presidential and Congressional elections, which could bring more uncertainty to offset any positive news on the coronavirus front.

The bottom line is this:  Home owners who purchased or refinanced in 2017, 2018, or the first half of 2019 may have a great opportunity now to lower their interest rate by refinancing.  And home owners with FHA loans a couple of years old may be able to refi to a conventional loan now and lower or eliminate their mortgage insurance premiums.  Some of my clients have lowered their monthly payments by over $200 a month.  One even lowered her payment by over $300 a month.  Did I just describe you or a friend you know?  If yes, call me (or tell your friend to call me) to discuss refinancing now, before rates start increasing.  Don’t miss out on potentially large savings.

Interest rates move lower

June 18, 2019

Interest rates/Mortgage rates (same thing) moved to a two year low earlier in the month. While rates have since rose a bit, they are much lower than the start of the year.

Rates are well over a half point better since the start of the year. This decrease is beneficial for two reasons. First, it is helpful for those out looking to buy a home right now. Let’s say someone was looking to get a loan for $250,000. With the improvement in rates, a buyer can now get a loan for $265,000 and have the same payment. More buying power!

The other is for existing home owners. The Chief Economist at Freddie Mac said with rates dipping below 4%, “there are over $2 trillion of outstanding residential loans eligible to be refinanced – meaning the majority of what was originated in 2018 is now eligible”

So… should I refinance? A couple of questions you can ask yourself:

  1. Did I purchase a home in 2018? If yes, then rates are definitely lower than when you bought. It would be worth looking into what a new payment could be with a lower rate.
  2. Are current 30 year fixed rates of at/below 4% better than a half a point or more than your current rate? If yes, then it is worth looking at the numbers.
  3. Considering taking some equity out for a home project? I am working with several clients doing a cash out refinance. With the drop in rates, these clients are getting a lower rate, cash out for home maintenance, and keeping a similar payment to what they are making now.

Do you fit into any of those questions? If yes, it might be time to review the numbers for a potential refinance. If you are a homeowner in the state of Georgia, contact me today! In a short phone call, we can decide if the time is right for a refinance. If rates aren’t low enough for it to make sense, we can set a target rate and I’ll contact you when rates move lower. It is that easy. If nothing else, it is worth inquiring to make sure you don’t miss out on this drop in mortgage rates!

Trade wars and mortgage rates

May 14, 2019

Last week was to be the culmination of negotiations between the US and China about a trade deal. Then came some finger pointing, blaming, and honestly tactics you see as negotiations come to an end. What is all of this doing to the market? I’m glad you asked!

Stocks were all over the place last week and this week… down 500 points to open one day only to rebound and finish the day flat… down a few hundred points… down over 600 points Monday… up 350 points as I write this post. Stocks are all over the map.

Brace yourselves!

Mortgage rates are in a similar position. The talk toward the end of the year (slowing economy, trade wars, bad economic news) pushed mortgage rates lower. In fact, rates are well over a half a point lower today than they were this time last year. The many months of tariffs and speculation pushed stocks lower and rates higher.

What happens with the trade negotiations:

  • If a trade deal is reached, one would expect stocks to rebound back to their all-time highs. Obviously this depends on the final details of the trade agreement, but overall expect to see rates get a little worse.
  • If both sides walk away from the negotiating table, then expect stocks to get worse and mortgage rates continue to improve.

What to do? If considering a refinance, this is a good time to move forward. Mortgage rates are as low as they’ve been in over a year. If considering a refinance to lower one’s rate OR take equity out of a home, there hasn’t been a better time in quite some time to do it. If you’ve been sitting on the fence about buying a home hoping rates could go lower, this angle is trickier. On the one hand, sure, mortgage rates could improve should trade negotiations fail. On the other hand, rates were much higher than they are now when stocks were at all-time highs. If a trade deal is finalized, we could see stocks jump back up to or surpass the all-time high. If that happens, expect mortgage rates to rise. It’s no coincidence that mortgage rates improved towards the end of 2018 as stock values fell. The same will happen should stocks take off again.

With rates sitting as low as they’ve been in over a year, now is the time to take advantage of them whether you are looking to purchase or refinance. If you are in need of a mortgage in the state of Georgia, contact me today. I can have you ready to move forward on a purchase or refinance is a little over 10 minutes. It’s that easy!

Mortgage rates rise again

October 16, 2018

Mortgage rates are on the rise (from the dead?!? 🎃🎃🎃Happy Halloween! 🎃🎃🎃) again in the month of October. Mortgage rates jumped sharply to yearly highs and to levels not see in over seven years. Mortgage rates for a 30 year fixed loan are nearing 5%. What is going on!?!

Mortgage rates rising can be scary!

A year ago, mortgage rates were just under 4%… that is about a full point lower than they are today. I know what a lot of people think… “it is because of the Federal Reserve raising rates.” Not exactly.

The Federal Reserve raised rates three times so far this year at 0.250% each time. That means the Federal Funds Rate is up 0.750% on the year, but mortgage rates are up almost 1%. Why the difference?

  • the Federal Funds rate directly impacts the rate on second mortgages, car loans, credit card rates, etc.
  • bond values – specifically mortgage backed security bonds (or MBS bonds)- impact rates for first mortgages. As these bond values decrease, mortgage rates increase.

That is what we’ve seen this year. Stocks are up on the year, the economy is better, and MBS bond values are down… meaning, higher mortgage rates. Remember the reason we saw all time historic lows for mortgage rates was two-fold.

First, the economy went through the Great Recession. In this environment, investors move money out of stocks and into bonds. The more money into bonds mean those values go up, and mortgage rates go down. As the economy improved, more money is going into stocks and out of bonds (bond values drop and mortgage rates rise).

Second, the Federal Reserve purchased bonds (quantitative easing or QE) to help push rates down to stimulate the housing market. The economy is now doing well, the Federal Reserve ended QE, and the Feds are now selling off some of the bonds they bought during QE. All of the factors pushing rates to historic lows are gone, and the current environment on rates is pushing them up. This trend doesn’t look like it will change anytime soon.

What can we expect? Earlier this year, mortgage rates jumped 0.75%, but recovered about half of those losses. We can expect to see some market fluctuations, and possibly some positive improvements in mortgage rates. Those looking for rates to get below 4% again? Those days are long behind us now, and probably not returning anytime soon.

Worried about rates going up even more? Considering buying a home but waiting for the right time? If you are buying in Georgia, contact me today. Let’s talk about what buying a home would look like for you, and see how the current dynamics in play will impact your next home purchase.

When volatility became normal

April 11, 2018


Welcome to 2018. The year where daily 400 point swings on the Dow became normal. In the words of Théoden, King of Rohan, “How did it come to this?”

 

There are a few economic events playing into the recent volatility seen on Wall Street. In no particular order:

  1. Stocks are a little more nervous about inflation.
  2. Stocks are unsettled from rumors of trade wars coming with countries imposing tariffs on one another.
  3. Stocks seemingly rebound after big drops because the numbers on the economy itself are still sound.
  4. The Republican tax plan may also be encouraging businesses to spend.
  5. Businesses are expecting more overall to some of the regulations imposed on them.

Those are some good reasons for stocks to be bouncing back and forth – sometimes literally daily swings in the 100s of points.

This being a mortgage blog, our readers want to know how the volatility impacts mortgage rates. Normally, when stocks have a rough day and lose hundreds of points, mortgage rates improve. How have mortgage rates responded over the past 6 weeks?… they’ve been flat.

Mortgage rates haven’t really improved on days stocks tumble, or got worse on days stocks have rebounded. This is a sure sign the market is expecting volatility and not overreacting to a single day. Will this continue? If stocks drop below 20,000, I would expect mortgage rates to improve (and vice versa should stocks get better). For now, rates have held firm and not overreacted to the craziness on Wall Street. The only damage to mortgage rates to this point has been the half point rise to start the year.

Out looking to purchase a home in the spring market? Needing to get prequalified? Contact me today! If in the state of Georgia, we can have you ready to purchase a home in no time!

How Government Policy Impacts Mortgage Rates

February 20, 2018

Mortgage interest rates continue rising.  Other recent blog posts have covered the impacts of inflation, the Federal Funds rate, and stock market influences on mortgage rates.  Another major influence on mortgage rates is government policy. 

In 2008, the Federal Reserve implemented a program called “quantitative easing” (QE).  The Fed created money to buy securities like mortgage backed securities and public bonds from banks.  This new money increased bank reserves.  The idea is that the new cash would motivate banks to lend more money.  In buying new assets, stock prices would rise, and interest rates would fall, thus boosting investment further.  Given the trillions of dollars of assets purchased, it’s logical to assume that interest rates on all types of debt are lower than they would have been without QE.

The Fed ceased QE security purchases in October 2014.  A government policy used to keep rates low ended, and experts wondered if mortgage rates would increase.  But rates stayed near their historic lows until November 2016.  Rates rose quickly after the election by almost a full percentage point, and then slowly retreated over most of 2017.

In October 2017, the Fed began “normalizing its balance sheet” by selling its securities holdings – selling the bonds purchased in QE.  Experts predicted this policy would have the reverse effect of QE:

·       Bond price decreases due to increased supply (as the Fed sells its holdings).

·       Falling bond prices lead to increases in bond yields, which translates to rising interest rates.

And that appears to be happening.  From a lender’s perspective – QE was great.  I loved quoting interest rates less than 4%.  And now it’s frustrating and stressful to see interest rates rising and continuing higher.  But it makes sense given the broader economic and government policy environment.

It is impossible to accurately predict where mortgage rates will go.  Sudden changes in government policy, international relations, etc. can cause mortgage rates to change direction.  Given that caveat, it appears likely that mortgage rates have truly left the historic low levels of the last few years and will likely not return there anytime soon.  I think it is logical to expect rates to continue rising for the short term.

So, if you know someone in Georgia who is considering a home purchase, it may be a good financial move to pull the trigger before rates go much higher.  Refer that someone to me and we can explore their loan options together.  We at Dunwoody Mortgage offer competitive rates in this changing environment, and as a small company, we can go directly to our executives to work out the best pricing “deal” possible.  In addition to competitive rates, we consistently deliver outstanding service to get home buyers to closing on time.

Any hope for mortgage rates?

February 15, 2018

As my colleague recently posted, mortgage rates are off to a rough start this year. As of this post, mortgage rates are a half point higher for the year. I won’t dig into the details of why this is happening. Rodney did a great job of it in his recent post. Today, I’ll focus on what can turn the tide for mortgage rates.

Stocks have suffered a rough start to the new year too. That is normally great news for mortgage rates. Normally as stock prices fall, bond values rise, and mortgage rates improve. The Dow fell over 2,000 points at one moment over the past few weeks, and yet mortgage rates also got worse. If a 2,000 point drop couldn’t help mortgage rates, what can?!?

We must look back at one of the root causes Rodney discussed – inflation. Mortgage rates hate inflation as it eats away at the value of mortgage backed security bonds. As those bond prices fall, mortgage rates rise. The way to help mortgage rates is to combat inflation. The best weapon we have at our disposal is the Federal Funds Rate… the Federal Reserve can continue increasing the Federal Funds Rate. In fact, every time they’ve done that over the past couple of years, mortgage rates have initially improved. Why? The higher the Federal Funds Rate goes, the more it can combat inflation.

Of course, the flip side is raising it too much can cool off the economy (don’t want that). Also, with the new budget deal passed last week by the government, more bonds will be sold to fund the increases to our national budget. More bonds available for sale also lower bond values, pushing mortgage rates higher. As I said in a post late last year, the environment for mortgage rates to get worse is here. That seems to be occurring. While mortgage rates are still low, the time of super low rates could finally be behind us.

The Federal Reserve could increase the Federal Funds Rate to fight inflation and help mortgage rates, but given the other factors at play, the increase to the funds rate may not help improve rates over the long haul for the time being.

If you’ve been sitting on the fence about purchasing a home over the past year because “rates are so low, why hurry,” the time may be now. If you are purchasing in the state of Georgia, contact me. We can get the prequalification process completed in minutes and have you ready to go out and find your new home!

Recent Mortgage Rate Changes

February 13, 2018

Wow!  Our economic world has gone crazy in recent weeks.  The Dow Jones average has dropped about 7.9% since its high on January 26, less than 3 weeks ago.

Mortgage interest rates have been changing dramatically too.  Rates have increased a half point (0.5%) since January 2.  Back in mid-December, I quoted an interest rate to a first-time home buyer named John.  Today, in mid-February, I would likely have to charge him 0.625% more than what I quoted in December.

So, what is driving the rapid mortgage rate changes?  In short, Wall Street, economic factors, and government policy.

To understand the basics, first realize that the vast majority of conventional mortgages are sold by lenders to Fannie Mae and Freddie Mac.  Fannie and Freddie then package these mortgages into mortgage backed securities (MBS).  Money managers, pension funds, insurance companies, mutual funds, etc. buy the MBS to keep in their investment portfolios.  They buy and they sell them like other investments. 

That means that the same economic factors that influence stock and bond prices – economic productivity, unemployment, inflation, and government policy – all impact mortgage interest rates.  And MBS must compete with other investment vehicles such as stocks and bonds to attract investors.

Many experts consider the market for 10 Year Treasuries as a benchmark or comparison for MBS.  Both investments offer stable, predictable cash flows.  Since January 2, 2018, the 10 Year Treasury rate has increased almost 0.4%.  Looks like interest rates on these competing investment vehicles are rising at the same time.

Given recent positive unemployment figures and wage growth, inflation concerns are increasing.  Higher inflation expectations tend to drive higher interest rates on Treasuries, bonds, and MBS.  Let’s face it, if investors expect inflation to be 3%, they will want to earn more than 3% on their fixed-income investments, right.  So as inflation concerns rise, it is logical to expect mortgage interest rates to rise accordingly.

When it comes to mortgage interest rates, there’s much more to consider, and we will delve into more details in future posts.  For now, if you know someone in Georgia who is considering a home purchase, please have them contact me.  We at Dunwoody Mortgage offer competitive rates in this changing environment, along with outstanding service to get home buyers to closing on time.

Republican tax plan and mortgage rates

December 12, 2017

All signs are pointing to the Republican party passing tax reform. The Republicans are using the “budge reconciliation” process to get the bill passed. By going this route, the Republicans avoid the need for 60 votes for approval in the Senate while preventing the Democrats the ability to use  a filibuster. Whether you opposed tax reform OR couldn’t wait until it arrived, tax reform seems likely to be here once the House and Senate finish reconciling their two tax reform bills.

What does this mean for mortgage rates?

Initially, nothing. On the surface, tax reform has no direct impact on mortgage rates. This is just like when the Federal Reserve raises the Federal Funds Rate. The Funds rate impacts second mortgages, car loans, credit card rates, etc., and not mortgage rates. But…. the impact these have on the market can impact mortgage rates.

Stocks have been on a major rally for roughly two years now. The DOW continues to set record highs. Why the surge? Wall Street has bet on tax reform that would benefit business. Trump’s election prompted a big rally back in November 2016, and this rally continued throughout 2017.

Now that tax reform is here, stocks seem poised to continue their good run and maybe continue to push higher. As stock values rise, bond prices normally fall due to the fact that people are putting more money into stocks than bonds. As bond values fall (specifically mortgage backed security bonds), mortgage rates go up. While tax reform doesn’t directly affect mortgages rates, the impact on stocks can influence mortgage rates.

Frequent readers of this blog are aware of how stock prices/mortgage backed security bond prices impact mortgage rates. If you are new to this blog, use this link to read past posts about the subject. 

Currently mortgage rates are definitely off of their yearly lows and moving back toward their yearly highs of 2017. Combine tax reform, continued stock market rally, and the Federal Reserve no longer purchasing bonds from quantitative easing (they are beginning to sell their bonds now), and you have an environment where mortgage rates could go noticeably higher.

Market analysts have said for years now (since 2010) that “this is the year mortgage rates go up,” and rates haven’t gone up. When do I think rates will go up? At this point, I’ll believe it when I see it. That said, the environment for mortgage rates to increase is as real as it has ever been in the past several years.

Considering refinancing or buying a home, but been pushing it off since rates are so low? Maybe now is the time to at least have a conversation about your plans, timing, and how to proceed? If the home loan will be in the state of Georgia, I can help! Contact me today and we’ll get started!