Posts Tagged ‘rate float down’

Federal Reserve’s impact on rates

March 21, 2017

I feel like I spend a lot of time devoted to the topic of the Federal Funds Rate. The main reason is the misconception out there when it comes to the Federal Funds Rates. Last Wednesday, the Feds raised the Federal Funds Rate again. Every time this happens, I get calls and emails with people worrying about mortgage rates going up. That isn’t necessarily the case.

Mortgage rates are not determined by the Federal Funds Rate… car loans, credit card rates, second mortgages… those are impacted by the Federal Funds Rate.

Mortgage rates are determined by the value of Mortgage Backed Security Bonds (MBS bonds). As these bond values go up, mortgage rates go down. When these bond values fall, mortgage rates go up. Typically, when the Federal Funds Rate increases, it should help mortgage rates improve. Why?

MBS bonds hate inflation… I mean they can’t stand inflation. As inflation rises, MBS bond values plummet and make interest rates worse. As the Feds increase the Federal Funds Rate, it helps fight inflation. This, in turn, helps MBS bond values to rise, and mortgage rates to improve:

  • the Federal Funds Rate increased in December 2015. Over the next few months, mortgage rates improved by 0.500%. Rates stayed around these levels for all of 2016. Rates got worse at the end of 2016 after the election fueled a major stock market rally. That triggered another typical trend with rates… when stock values go up, bonds go down, and mortgage rates go up.
  • The Funds Rate was increased again in December 2016, and mortgage rates improved by 0.125% in the 6 weeks between Fed meetings.
  • We are about a week past the most recent rate increase by the Fed (third time since December 2015). So far, mortgage rates have improved by another 0.125%

What does this mean? When you hear a story about mortgage rates rising because of the Federal Funds Rate going up, don’t panic. The Funds Rate may go up, but mortgage rates could improve.

If you are looking to buy a home in Georgia, contact me today to get started. We have two tools to help you in an ever-changing rate market.

  • Float Down: Should rates improve after we’ve locked your rate, we can float it down at no cost to you one time during the loan process. If rates improve by 0.250% or more, we are within 30 days of closing, but 8 days prior to closing, we can float the rate down to current market value. That’s it. Easy! We have a three-week window to take advantage of this.
  • Lock-and-Shop: Worried that rates might go up? Don’t be. We can lock a rate for 60 days without being under contract to purchase a home. The rate is locked, find a home, and we start the loan process. The Float Down option as described above also applies to the Lock-and-Shop. So, you can get the protection of locking the rate, but also the opportunity to lower the rate should mortgage rates improve. The rate will not get worse so long as it is locked.

It is as simple as that!

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Volatility Reigns

January 31, 2017

blog-author-clayjeffreys3

Market volatility is going to be the theme for 2017… or at least the theme for the foreseeable future. Basically, I am picking up where I left off a couple of weeks ago. As discussed last time, Wall Street seemed to embrace the idea of a Trump administration as stock values soared after the election… well, so did interest rates. Rates rose over a point in the roughly 2 months after the election. Rates did begin to improve some until…

Stocks hit 20,000 for the first time ever. Rates went back to their higher levels since the election. Then something unexpected happened… Trump signed the executive order for the immigration ban. The Dow is off about 200 points from its all time high, and interest rates improved by 0.250% in the last few days. It is going to be a bumpy ride. If this is too much, then take a deep breath, keep calm, and…

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In addition to keeping calm and loving our pets, is there anything else that can help when buying a home in this volatile market? Yes, there is!

As briefly mentioned in my last post, there is a one time FREE rate float down on locked interest rates with Dunwoody Mortgage Services. After we lock the rate, should rates improve by 0.250% or more, then we can float the rate down to the current market for the home purchase. The rate will NOT increase while locked; it can only improve while it is locked.

Looking to buy a home in Georgia? Like the idea of locking to protect your rate, but having the option to lower should rates improve? If so, contact me today? I can get you prequalified to make an offer, and explain all the details of the float down process.

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Economic Uncertainty and Mortgage Rates

January 17, 2017

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How does economic uncertainty impact mortgage rates? I’m glad you asked!

In general, when the economic outlook is good, investment dollars go into stocks. As money goes into stocks, there is less money available to go into bonds. This flow of money causes stock values to rise, and bond prices to fall. As mortgage backed security bonds (or MBS Bonds) values fall, interest rates rise.

Some recent recent examples:

  • Brexit Vote: when the UK voted to leave the EU, that sent shockwaves through the world financial markets. Stock markets around the world pulled back, and bond prices went up. Mortgage rates improved until…
  • US Presidential Vote: Mortgage rates soared as stocks soared after Trump was elected president of the United States. Seems stocks felt Trump’s election would be a boon for business in the US. Stocks flirted with all-time highs day after day once Trump won the election. With this much money going into stocks, bond prices dropped, and mortgage rates increased by over a full point (from low 3’s to mid 4’s) in the weeks following the election.
  • US Presidential Inauguration: as the nation gets ready for the 45th President of the United States, there are signs the honeymoon period is over. A recent article said Trump would have the lowest approval rating of any President at inauguration. The gains in stocks have slowed, and there is growing concern about the “trade war” rhetoric. Maybe a trade war works out in the long run, but the short run in hurts business, hurts investments, and can cause a recession. With these thoughts in mind, we’ve seen stocks pull back over the past couple of weeks, and mortgage rate have improved.

What does the future hold? For those wanting to see lower rates, economic uncertainty is a main contributor to rates improving. It is no coincidence that all-time lows in mortgage rates occurred during the Great Recession. It is also no coincidence that mortgage rates haven’t dramatically improved since the economic recovery from the Great Recession has been slow and painful for many. And there in-lies a great dilemma… the quickest way for mortgage rates to improve (outside of Governmental influence such as Quantitative Easing) is from economic hardship. While low rates are great, in the long run, a sluggish economy isn’t great either.

Looking to buy or refinance a home? If refinancing, sitting and waiting isn’t a bad idea. I am currently watching rate for several clients in hopes they continue to drop. Once we hit our target rate, we get started. If buying, this is trickier as you can’t sit and wait for a long time on rates when there is a closing date involved! This is where our FREE one time rate float down comes in handy. Ask me about it! If the home is in the state of Georgia, contact me. We can get started today on your loan.

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How World Events Impact Mortgage Rates

March 18, 2014

blog-author-clayjeffreys3

What do protests in the Ukraine/Thailand/Venezuela, the Crimea dispute, and poor economic news from China have in common? In some way, shape, form or fashion, they impact mortgage rates.

“How” this happens is the better question.

A general rule of thumb with interest rates is this… When there is negative/bad news (poor economic outlook, rumor of war, unrest), mortgage rates tend to improve while stocks lose value. When there is positive/good news (good economic outlooks, increased hiring, resolution to unrest), mortgage rates tend to get worse while stocks gain value.

Notice I used the words like “general” and “tend” in the previous paragraph. With the events over the past several weeks, volatility and inconsistency reign supreme. Let’s look at some examples:

– On March 13, 2014 – China released economic news that continues to show a slow down in their economy. Meanwhile back at the Crimea Peninsula, Russian troops were conducting war games/exercises.

The result? The Dow lost well over 200 points, while mortgage bonds had one of their larger single day increases of 2014. These negative events/news stories helped interest rates improve.

– On March 17, 2014 – It is announced that Crimea has voted to join Russia. This lead to the Ukraine and Western countries threatening sanctions, Russia stating its support for the move, and a tenuous situation becomes increasingly complex and strained.

The results? The Dow endured further losses? Nope. Quite the opposite. The Dow had gains of almost 200 points with today’s futures showing even more gains. Typically, news like this would hurt stocks and help rates, but interest rates worsened on Monday.

The markets seem to be currently reacting to events in unexpected ways. This makes forecasting the direction of mortgage rates more difficult than normal.

How should you respond if you are in the market for a new loan? I have two ways:

1. Lock and Shop: go ahead and lock an interest rate for an extended time without having a home under contract. Once you find a home and are within 30 days of closing, you can then use a float down if interest rates are better than your original lock.
2. Rate Float Down: whether or not you use the Lock and Shop program, should interest rates improve by 0.250% or more from your original rate lock, you can float down to the current rate for free. There is no fee to use this feature. The float down can be used once you are within 30 days of closing and prior to 7 days before closing.

Using either of these programs gives you the best of both worlds… should interest rates get worse, your rate is locked! Should interest rates improve by 0.250% or more, you can still float down to the lower interest rate. This protects you regardless of what happens with the latest US jobs report, or economic outlooks in emerging markets, or the latest events in Crimea… your rate is protected.

To learn more about the free Float Down or the Lock and Shop program, contact me today. I can help you protect your rate now even if you haven’t found the home of your dreams.

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Rate Float Down

June 11, 2013

blog-author-clayjeffreys2

My last two posts detailed rising interest rates over the past month. Now buyers are not only looking for homes, but also wondering when is a good time to lock. I mean, rates rose dramatically. Do I think there will be a rebound lower?

If there was only a way to take the guesswork out of when to lock a rate! There is…

My clients can use a onetime FREE float down on their locked rate. This applies to my clients whether they are buying a new home OR refinancing their existing home. How does it work?

Don't worry. Falling rates is a good thing!

Relax. Falling rates are a good thing!

The float down can be used once an interest rate is locked, and we are within 30 days of closing. If interest rates improve from the time of lock up until 6 business days prior to closing, we can float the rate down to the current market.

Most of the time, clients wind up lowering their rate 0.125%… sometimes it is a 0.250%… I’ve even had a client lower their rate 0.500% from the lock rate to the floated down rate. So whether there is a slight improvement OR a dramatic improvement in interest rates, we can make up the difference even if the interest rate is locked in!

How does one take advantage of the rate float down option? Well, first, you’ve got to get started! Whether you are looking to buy a home or refinance your current home, you need to be prequalified. Then we lock in your rate and just wait and see. You don’t have to worry about if you timed the market right:

– if rates get worse, your rate is locked and not getting worse
– if rates improve, you can float down to the lower rate

There is no reason to delay locking in your interest rate. Contact me today (scroll to bottom of page for my info) to get started. I’ll take the worry of timing the market out of the equation. That will allow you time to focus on packing, moving, and painting some rooms in your new home!

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Going Up? Down!?!

February 15, 2011

Sometimes going down isn’t the worst thing in the world… lower prices, or in this case, lower interest rates!! Let me explain.

One of my recent posts discussed the Lock and Shop program. Click the link for all the details, but in short, buyers can lock in a rate for 60 days prior to even looking for a home. This way the buyer knows their rate won’t get any worse and can put their focus on finding a home instead of trying to time the rate market.

A common question I get about the Lock and Shop program goes something like this… doesn’t a 60 day rate lock mean a higher interest rate? The answer is yes, it typically does mean a higher interest rate. That isn’t a problem when you pair it with a FREE one-time rate float down option. Let me explain.

Initially, my clients can lock in their interest rate today using the Lock and Shop program. Then once we are within 30 days of closing, if rates have improved, we can float my client’s locked interest rate down to a lower interest rate. There are no gimmicks, hidden fees, or anything along those lines associated with the one-time float down option.

The float down option is also available to buyers or home owners refinancing who did NOT use the Lock and Shop program.

How does one take advantage of the rate float down option? Well, first, you’ve got to get started! Whether you are looking to buy a home or refinance your current home, you need to be prequalified.

During the initial consultation of the prequalification process, we can determine if using the Lock and Shop program makes sense OR just move forward with a rate lock knowing with either course of action we can always float that interest rate down if the market improves.

Take the worry out of when to lock your rate. Use the FREE one-time float down option, and that is a program I am able to offer my clients.