As the Dust settles…mortgage rates improve!!

As I spoke a little the other day in the midst of the mortgage rate meltdown, many of us suspected that this was Wall Street overreacting to the Fed’s comments.  Now, before I say I told you so, we have to analyze what Ben Bernanke said last week.  It was clear and there were two parts to the story.

Not so easy it is Ben??
Alan Greenspan having a chuckle…

The first, Mr. Bernanke stated how the economy was heading in the right direction, things were getting better and it some point in the future the Fed would begin to start “tapering” its bond buying program that it has done for a few years now.

It would appear, the children running Wall Street only heard one thing….”There is Cake and Ice Cream in the break room!!”  What they missed was, “You can’t have any until you clean your room.”  Now, isn’t that much clearer to put it this way??

The Fed Chairman then followed his positive outlook comments by saying he was not altering its primary stimulus program, its stated intention to hold short-term interest rates near zero at least as long as unemployment remains above 6.5 percent and inflation stays under control.  This would be the cleaning the room part.

Mr. Bernanke said that the Fed intended to reduce the volume of its monthly bond buying later this year.  The Feds are currently buying $85 billion a month in Treasury securities and mortgage-backed securities to keep rates as low as possible.  What caught investors ear was “Later this year” he would start cutting his treasury buying program…this was sooner than originally planned.  Thus causing a panic in Wall Street and around the world where mortgage rates went up and the stock market tumbled.  Very rare to have both of these markets take a dive as they did. The Feds are now doing damage control and trying to put out a clear statement, which is working to some degree.

Now, back to the part of where “I told you so”, today’s headlines in several of the Mortgage News updates, “Mortgage Rates Fall at Fastest Pace in June”.  We are seeing a some improvement!  I don’t thing we will get back to the lows of earlier in the year, but we should see this calm down a bit and settle in to the low 4’s.  This is my opinion and anything can happen with the economy.  Mr. Bernanke is a few pay-grades above me and he did not see this coming!!

Bottom line: If you are looking to buy a home or possibly refinance, the current rates are still at their lowest they have been since the 1960’s!!!  To give you an idea of what this may cost you if you were to borrower $100,000 at today’s rate of 4.50%, it would be $507 per month compared to $450 at 3.5% that we were quoting in April. This is only an increase of $57 per month.  This is based on a 30 year fixed rate with 0 points.

Is it the right time to buy?  Of course, if you are looking for a new home, it has never been a better time.  Ok, perhaps last month would have been better, but this still pretty darn good!!!

Do you have questions about buying a home? Do you have questions about what is the right program?  This is what I am here for, to help guide you through the process, to make it easy, affordable and most of all, get you and your family in to the home of your dreams.

Email me anytime with any questions you may have about the home buying process.

Bill Nickerson NMLS #4194

Merrimack Mortgage Company179 Great Road Acton MA 01720

Bill’s Email

So…What happend to Mortgage Rates??

As we have learned…The Fed, The Economy and Wall Street are very similar to the weather here in New England, just wait 5 minutes and it will be different. In this case it was a True Nor’ Eastah!!

Oops…was I not clear enough??

The Fed, which can be a love hate relationship, has a strategy that has been open-ended, it just pumped money into the economy, hoping things got better and for the most part, the economy is heading in the right direction.   Now, Fed Chairman Bernanke says he has a more definitive game plan or at least as definitive as the Fed can be!!  Mr. Bernanke will continue to buy Treasuries and bonds to stimulate the economy until unemployment falls to at least 6.5 percent — and as long as inflation stays low.   Overall, this has been his plan and he is announcing that if we keep this pace, he is going to back off on pumping these funds into the markets or increase as needed.  As we saw last month, Unemployment creeped up to 7.6% indicating the economy slowed.

Because of the comments and the timing of The Fed’s message this past week,  Investors on Wall Street ignored the details of Ben’s plans, even know they really have not changed that much.  The idea is to inject enough money into bonds and treasuries to keep long and short term rates low which will allow slow and steady growth in all sectors with Housing being the main focus.

“I think Wall Street overreacted,” said Bloomberg Government’s Nela Richardson. “It was almost as if Bernanke punched Wall Street in the collective gut, and that’s not what his intention was. He said — very clearly, I thought — that the Fed would begin to taper if — and only if — the fundamentals looked good. Not good enough, ‘good.'”

The markets are misreading the Federal Reserve’s messages as Investors reacted in a big way; the Dow Jones Industrial Average suffered its worst loss of the year. In the two days since Fed Chairman Ben Bernanke said the central bank expects to curb its big bond-buying program later this year, stocks tumbled, long-term interest rates rose and interest-rate futures contracts fell, meaning investors bet the Fed would raise short-term interest rates sooner than previously expected.

What investors did not hear was his second point: If the Economy does not meet the Fed’s expectations,  Ben Bernanke is then willing to adjust the pace to keep interest rates low.  Investors, the Markets, Wall Street and many others ignored this statement!  Again, causing the Dow to have it’s largest drop in over a year and mortgage rates to surge to their highest point in over 2 years.

So, where are rates today?  Just over a month ago, the 30 Year Fixed Conforming Mortgage rate was trading at 3.5% (plus or minus an 1/8^th).  Today, we are seeing this same rate trade at 4.375%-4.625%.  A full point higher than just a month ago. On a $100,000, this is an increase of $105 per month and on a Loan amount of $417,000, this is an increase of $240 per month.

In my opinion as well as a few others, we should see some type of correction in the Markets.  As these rates have moved so fast, it is possible this slows down the economy even more. It has brought refinancing of homes to a complete stand still.  Purchases should still move forward, but it will cause buyers to rethink the amount they are borrower in some cases.

For more information about mortgage rates, programs and the economy, feel free to email me at Bill@billnickerson.com