Archive for the ‘the Market’ Category

As good as it gets . . .

January 15, 2009

A lot of people are waiting . . . waiting on things to go lower, waiting to see what President Elect Obama does, waiting on 4.5%. 

Why??  (I really don’t know, but let me give it a shot).

Some are waiting because it only makes sense for them to refinance if rates go down a little lower.  Others (a good number of others), are waiting because they are hoping for something better.  They have “heard” that things might get better or go lower — one radio station in Atlanta (and I don’t know it was run as news or as a misleading advertisement) ran something saying that mortgage rates were currently between 4% and 4.5%.  With normal and customary closing costs, this is just not true.  It is true if you want to pay 3.5 points to buy the rate down, I guess.

Certainly, the Feds stepping in to the mortgage-backed-securities market with billions of dollars has helped to push interest rates down slightly.  (Remember, mortgage rates always move in anticipation of things, and mortgage rates went down in December on the news that the Feds would begin purchasing mortgage-backed-securities.)  The Fed’s first real purchasing began last week — they bought $10.2 billion of Fannie Mae, Freddie Mac and Ginnie Mae backed securities and the increase in buying demand helped to keep prices (and mortgage rates low).  The Feds have said that they will purchase a total of $500 billion in mortgage-backed-securities between January and July of this year.   And this promise from the Feds, has some hoping that mortgage rates will push even lower than current levels.

What if the Fed’s actions only help to keep mortgage rates as low as they currently are — at 30 or 40 year historical lows?  What if mortgage rates can’t push much lower than 4.75%?  What if this is as good as it gets?


Today’s market is a great example.  More Fed dollars were injected in to the mortgage-backed securities market ($23 billion) . . . and mortgage rates have gotten worse.  Yes, mortgage rates have gone UP (not much, but up). 

As funny as it sounds, I have had more than one potential client “sigh” when I have quoted them 4.875% for a 30 year fixed-forever mortgage.  FOUR AND SEVEN EIGHTHS!  FIXED!  FOREVER!  Let me ask you this, if you have $200,000 available in cash, would you be willing to invest that money in a fixed CD, to lock the money up for as much as 30 years at a steady rate of 4.875%?  No way.  You would never do that — and that’s for the safe investment of a CD.  What about a mortgage debt?  Add the risk and costs associated with a mortgage, possible defaults, costs of servicing, losses in foreclosures, decreased property values, mortgage fraud, etc. and there just doesn’t seem to be a whole lot of room for things to go lower.

If you are waiting, I would encourage you to look at the numbers closely . . . if you are going to save money at 4.75% or 4.875%, how much more are you going to save at 4.625% or 4.5%?  Is it worth the risk of waiting? 

I would also encourage you to pick a target.  Find the number that works best for your specific siutation (based on your current rate, expected time in the house, etc) and be ready to take action if that rate is available.  In this market, one of the most important pieces of info is knowing when it’s time to take action.  Check out the recent posts below or on the previous pages (info on, promo code = the mortgage blog) to find out how you can get a target rate set — and be alerted when that target refinance rate is available.

Or, you can wait.  You can wait for 3.5% . . . did I hear someone say that  rates might go down to 3.5% in 2009 . . . I say, “sell crazy someplace else, we’re all stocked up here.”


Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit


Best rates of the year! (now gone, gone, gone)

January 2, 2009

As we start off the business year of 2009, the one thing that stays the same, is the same thing that stayed the same, or, wait, is it, the only thing that stays the same is the thing that changes, or, is the thing . . . whatever the saying is.  New year – same story.  Volatility in the mortgage backed securities market remains even in this new year.

So, where are interest rates headed for 2009?  Well, I am not sure that anyone can answer that with great confidence accurately, but the media and the general public are certainly anticipating lower mortgage rates in the near future.  And, while that may be a possibility in the coming days, weeks or months (as the billions of dollars in mortgage assets are purchased directly by the US Treasury), for now, the best interest rates for the year have come . . . and gone.

That’s right.  This morning, the markets opened and investors published one set of rate sheets (a 30 year fixed rate loan around 5%, or so) and as the mortgage backed securities markets lost ground during the trading day, most lenders re-priced their available rates — increasing rates across the board by 0.125%.

My advice to my clients remains the same — if the numbers to refinance make sense for your situation (based on monthly savings, months to recoup closing costs in savings and the time you are expecting to stay in your home), then you should refinance.  Will you lock-in your rate at the absolute bottom of the market?  More than likely not.  Just as the stock market fluctuates (and has fluctuated wildly) so does (and will) the mortgage backed securities market.  So, if you can lock in close to the bottom — and at a rate and term that makes sense for you — then you have saved money and made a good decision.  If you wait . . . well, we’ll have to wait and see how that works out.

One thing I can tell you about interest rates, I wouldn’t recommend “waiting until next year for rates to go lower.” 


Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit

A strange feeling . . .

May 24, 2007

I talk with people every day about mortgage rates.  Clients, potential customer, Realtors, friends, neighbors — everyone has the same questions.  Question number one:  “What are rates looking like today?”  Question number two:  “Which way do you think they are headed?”

The first question is a fairly simple one to answer.  After looking through a few different investor rate sheets (and shopping them against one another), I find the best rate that I can offer and quote that rate.  Most of the times the first question is really, “(Assuming that I have a 720 credit score and 5% to put down and my income is sufficient to carry the monthly payment and my debt obligations) what are rates looking like today?”  Answer:  easy, a 30 year fixed is at 6.0%.  And for all of you compliance gurus, that is an APR of 6.152%, based on a $200,000 loan amount on May 24, 2007, rates subject to change without notice, etc., etc.

The second question is a little bit tougher to answer.  And here is why . . .

Simply, no one really knows where rates are headed.  It’s kind of like the weather — we can watch certain indicators, predict some things that will affect it, and make a strong, educated guess.  But at the end of the day, it is intelligent, well-informed guessing at best. 

I subscribe to a service (with a healthy yearly fee of course) that gives me real-time market positions in the mortgage backed securities market.  This is the same market that lenders watch in order to determine rate-sheet pricing for the day.  This service also offers daily commentary on the market, what to expect in economic news for the week, and their bias towards the market’s direction.  This service allows me to advise clients what to do and when to do it (locking in and protecting their rate versus floating), and it gives me a pretty accurate barometer of which way things are headed.


In the chart above (short-version), each candlestick represents one trading-day.  Green (up) is good and red (down) is bad.  When the chart goes UP, mortgage rates go DOWN.  When the chart goes DOWN, mortgage rates go UP.  The different color lines represent monthly averages and act as fence posts for trading ranges for the market. 

But even with this tool (which sits open on it’s own monitor next to my desk, sends me text messages to my phone every hour with updates, and calls my cell phone and office phone in the event of a drastic market turn around), it can still be a delicate situation.  Ninety percent of the time, potential borrowers have been recommended to me by past clients, realtor partners, friends or family.  In these situations, where people know me and know my reputation, my advice is often well received and usually taken.  In other situations, my being overly sensitive to the mortgage bond market can have me sounding like a car salesman.  Here is what I might say, “Well, Mrs. Smith, the mortgage backed-securities market has really lost ground in the last few days and is actually doing so poorly today that investors are likely to change their rate sheets before the end of the day and rates are likely to go up an 0.125%.  My guess is that rates tomorrow will be worse than today’s, and my recommendation is that we start the application and lock-in your rate as soon as possible.”  Unfortunately, what they sometimes hear is this, (slick-sales-voice) “Well, ma’m, today’s rate is 6.0%, but I’m not sure that this deal is going to around tomorrow.  You probably want to go ahead and get started today before it’s too late.  I’d hate for this model (I mean rate) not to be around tomorrow for ya.  What can I do to get you into a 30 year fixed rate mortgage today?” 

So, when getting mortgage advice, make sure that your hired-help (mortgage consultant) is giving you the best advice possible.  If they are guessing at rates by looking at the 10-year Treasury or listening to banter around the water cooler, fire them and look for someone who is going to watch the right indicators.  And, hey, if you have lots of free time, read up on it yourself . . . there are people out there who know more about the market than me. 

Just be leery of trusting this guy . . . (you’d be surprised how many times I hear this one):


I have a strange feeling (that rates will get better) . . . one I haven’t felt in quite some time.

US Economy — too hot, too cold, or just right?

November 10, 2006


When reading about the US economy, and as I look through different articles from various websites, one thing is certain — Democrats (leaders and followers) are never happy with Republicans and, Republicans are never happy with Democrats. Both sides would likely say, “They are not doing a good job managing/fixing/improving _____ (blank)” insert any political-type issue here – the economy, health-care, education, the war in Iraq, etc; “but we could do much better.” Or they’ll at least say that until they lose the election, and then they’ll smile for the camera, act like friends and say that they are “looking forward to working together for a better _____ (blank).”

So, in light of this week’s election, I thought it would be interesting to post some information relative to the U.S. economy — is it too hot? (the Feds might say it is, and hence, the possibility of an 18th rate-hike), too cold? (the Democrats might say, but I would argue mainly because they are pushing the ‘we could do better’ theme), or just right? (which is what the Republicans might say, partly to justify the job that their people are doing in office and to combat the whole ‘we could do better’ thing). And, because of election dynamics (spin) and because the White House has proven to be a miserable judge of who is and who is not doing a ‘heckuva job’ (see: Browny, Snowy, and Rummy), any real information about the strength or weakness of the US economy can not be gathered through political statements, newspaper headlines or television personalities (spin or ‘no-spin’).

Here is the problem — pick up the newspaper (or click to any favorite news website) and you will find an article that convincingly shows how poorly the economy is doing (the housing-bubble bursting, unemployment issues, etc.), turn the page (or click the mouse), and you’ll probably find another article discussing numbers and facts that would point to the US economy growing so strongly that additional Fed rate hikes may be necessary to slow things down.

So which is it? too hot? too cold? or just right?

Let’s take a look at two indicators that seem to tell the story best.

employment numbers: for last month, unemployment fell to 4.4% (it’s lowest in 5 years) and average hourly-earnings were reported up 3.9% for the past year. Seemingly, this would mean that more people are employed, and, on average, people are making more money than they did a year ago. But, the employment market has slowed down more than anticipated — still growing, just not as quickly as some ‘econo-guessers’ had hoped. So is this good news? or bad news? Well, it depends on where you read it . . . according to the “disappointing job growth” number was bad news. But, according to, the same data “[flashed] a picture of a strong labor market as midterm elections [drew] near.” So, which is it? good or bad?

the housing market: The media has hyped for more than a year over the issue of a bursting real estate bubble. While apparent (and somewhat obvious, I think) in some parts of the country — have you seen what kind of house you have to settle for in California if you can only spend $1 million?? — the reality of a recession-inducing nationwide housing bubble seems to have been avoided at this point. Although one reporter at claims we are “at the endgame for housing,” while others, as you might guess have a different view. Kendra Todd (winner of the Apprentice), claimed that “the housing bubble [was] a myth . . . [and that] bubbles are for bubble-baths.” Now, of course, the term is no longer bubble, but ‘measured moderation’, a ‘cooling market’, ‘soft land’, etc, and across the country, the housing market seems to be doing exactly what the Fed Chief Bernanke predicted, it is slowing down in an “orderly” fashion. So which is it? bursting-bubble? or an orderly slowing? Is there such thing as an orderly-bursting???

The real issue (aside from the fact that ‘news’ is not really ‘news’, but is instead some strange form of editorialized, politicized, agenda-driven, fake-unbiased information where the line between reality and opinion is hard to find), the real issue is that something like economic strength — whether it be employment, unemployment, house appreciation, house depreciation, or something similar — about the entire US economy is not a great indicator of the health of the same thing on a local level. In order to get an accurate idea of the economy as it relates to you, you need to know the data from your area.

I’ll work on another post for the Georgia-faithful who read “the Mortgage Blog,” to give you some local data . . . until then, the question of the US economy being too hot? too cold? or just right? might ought be replaced with this one . . . the news on the US economy . . . too left? or too right?

the Feds raise rates by 0.25%; mortgage rates go down?

June 29, 2006

Today the Federal Reserve raised the Federal Funding rate by 0.25% — raising the short-term benchmark for the 17th time in a row and the second time in a row for new Fed Chief, Ben Bernanke.  The Federal Funding rate now stands at 5.25%. 

ben bernanke

In the statement released by the Feds today, they left the door open for additional rate hikes, largely dependent on economic data released from now until their next policy meeting on August 8th.  

Most consumers will hear the news that the “Feds have raised rates again” and think about the interest rate on their mortgage.  Interestingly, the Federal Funding rate is the rate at which banks lend money to each other in order to meet their mandated reserve requirement.  When the Feds raise this rate, it increases the cost of doing business for banks, and that additional cost is passed onto consumers in the form of higher interest rates on auto loans, consumer loans, business loans, credit cards and second mortgages.  Most banks lend money in these categories based on a standard “prime rate” (generally 3% above the Federal Funds rate).  So, tomorrow morning’s 2nd mortgage and home equity rates are likely to increase by 0.25% across the board.

So what about long-term mortgage rates?   

Well, a rate-hike by the Feds is mostly good news for mortgages.  A rate-hike by the Feds is a signal that the Feds are fighting inflation, and inflation is the arch-enemy of mortgage-backed-securities and mortgage bonds.  If investors are overly concerned about future inflation, then their return on investment (for a long term mortgage loan, for example) will have to be more in order to compensate for the deterioration of value.  It is actually the fear of inflation that helps to drive mortgage rates higher.  Today’s move by the Feds (and even more so, their comments) are a good signal to the market that the Feds are committed to fighting inflation and ultimately protecting the value of long term investments.  The comments from the Feds — confirming the recent “moderating of economic growth” and the fact that “inflation expectations remained contained” — were met by a late-day rally in the mortgage market, likely to result in an improvement in interest rates for tomorrow. 

While the Fed’s actions aren’t likely to change the course of mortgage rates drastically, if you (or someone you love) are in the process of purchasing a home, tomorrow might be a great day to take advantage of locking-in your rate . . . and if you currently have an adjustable rate mortgage (especially one that is due for adjustment in the next 1 to 24 months), then you are well past-due to consider your options. 

More on adjustable rate mortgages (ARMs) and interest only ARMs next time.  A great tool to manage your cash-flow?  or “exotic” and “dangerous”? (you laugh, but I read them described that way)