The Federal Reserve has been discussing slowing down and eventually ceasing its bond purchases. This bond purchase program is, to some degree, what has been responsible for pushing interest rates down for a long time. When that bond buying party stops, interest rates will increase. The mere discussion by the Fed of ending this program has caused interest rates to rise, which are up about 0.375% to 0.5% over the last few weeks. These comments from Federal Reserve officials, as well as stronger than expected economic data, has caused investors to think that the Fed will begin to scale back its bond purchases sooner than previously expected. As a result, mortgage rates have gone higher over the last few weeks. Read the rest of this entry »
It never ceases to amaze me how people treat the most expensive transaction that they will ever do in life as a commodity. Would you get surgery at McDonald’s if they got into the health care business because it was the cheapest place to get it? Or would you talk to numerous different doctors based on experience, referrals, track record, and interaction with their staff and systems? I know as you read this blog you would say the answer is that you’d go with Read the rest of this entry »
Why do I feel like when someone calls me to talk about interest rates, they are calling multiple people, scouring the internet, and getting a lot of misinformation? I have a good friend who works at Freddie Mac (FHLMC) who I met for dinner recently. Over dinner conversation she mentioned that when FHLMC sends out their report on average interest rates. They get calls daily from homebuyers and people interested in refinancing. These people ask how to apply with FHLMC for that rate! My friend says the callers will say, “Can I get that rate from you that you guys reported, I can’t find it anywhere else!” They then have to explain that FHLMC is not a lender. FHLMC is a corporation authorized by Congress to provide a secondary market for residential mortgages. Read the rest of this entry »
Unexpected strength in the labor market was reported on Friday March 8th. The good economic news seemed to cause stocks to rise to record levels, but this alleged good news also pushed mortgage rates higher last Friday.
It was forecast that there would be 170,000 jobs added in February of this year. Since the economy added 236,000 jobs in February and the unemployment rate declined from 7.9% to 7.7%. This is “alleged good news” because the unemployment numbers do not take into account the number of people who have given up looking for jobs. If those people see this alleged improving economy and start looking for jobs again as a result, and they should get reported in the unemployment numbers again, then unemployment would actually be much, much higher. Read the rest of this entry »
It looks like rates are edging up today, again. Here is this morning’s bond market update from MBS Online:
“MBS are down -13/32 (FNMA 30-yr 3.0 at 103.23), around 16/32 lower than yesterday at this time. Unfavorable repricing took place yesterday. Early investors may have priced at levels as high as -10/32.
Global investors have continued to shift to riskier assets today, pushing major US stock indexes to multi-year highs, and hurting bonds. Stronger than expected economic news from Europe was the main influence today. MBS prices have dropped to levels last seen in September. The Dow is up 50 points. New Home Sales will be released at 10:00 ET.” Read the rest of this entry »
I wanted to share today’s update from MBS Online, which is the service that I use that tracks mortgage-backed securities, which is the best gauge of what the interest-rate market is doing. Here is this morning’s update:
“Stronger than expected labor market data hurt MBS this morning. Weekly Jobless Claims fell to 330K, below the consensus of 360K, and the lowest level since January 2008. This marks the second straight week that Jobless Claims were below the 350K level, which may signal that stronger Employment gains will be seen. The Dow is up 50 points. Leading Indicators will be released at 10:00 ET.”
My take on this is that this is one more slight signal that puts the bond market and mortgage-backed securities under pressure, and is another small bit of data that has helped to push up interest rates lately.
The 10 Year T-Bond has jumped from 1.83% yesterday to 1.86% this morning. For mortgage consumers this can mean a slight increase in points, but not necessarily rates, or if the negative news continues then rates may increase 1/8%.
AFTERNOON UPDATE: “MBS are down -10/32 (FNMA 30-yr 3.0 at 104.02), around 6/32 below morning levels, and at the low for the day. Unfavorable repricing took place. Stronger than expected Jobless Claims data caused MBS to move lower today. Manufacturing data in Europe and China also exceeded expectations. Leading Indicators rose 0.5%, matching the consensus. The Dow is up 50 points. The S&P 500 index crossed above the 1,500 level for the first time since December 2007. Tomorrow, New Home Sales will be released at 10:00 ET.”
Keep your eye on this blog for more news soon, but this seems to be the year that many people think that interest rates will rise. Let’s see if the news and the data cause that to happen.
I am going to continue to post, when appropriate, updates from the service I use called MBS Quoteline, that updates me on the bond market. Remember that in general, inflationary news is bad for the bond market and interest rates, and deflationary or recessionary news is positive for the bond market and interest rates. The news for today is: Read the rest of this entry »
Interest rates went up this week, about 0.25% to 0.375%, depending on the type of loan. Below are some details from a bond market service I use (called MBSQuoteLine) that sends me news on the bond market, which is the biggest driver of the direction of interest rates, on why this rate increase happened.
Mortgage Rates Move Higher
Below is a copy of some data I received from a bond market data service I use. It reports on bond market news several times daily. It helps me get a gauge on which way interest rates may go for the day and in general. I wanted to paste a recent email they sent me, and in parentheses and in CAPS give you my interpretation. Below is the data with my comments. Read the rest of this entry »
I wanted to share some interesting mortgage math with everyone.
- Would you rather buy a $600,000 home, have a 20% down payment, and finance a $480,000 loan at 3%? Or would you rather buy a $200,000 home, with the same 20% down payment, and finance a $160,000 loan at 10%?
The $600,000 home is 3 times the cost of the $200,000 home. The 10% rate is over 3 times the cost of the 3% rate, so the monthly payment and cost should be about the same?$480,000 @ 3% over 30 years = $2023 a month with total payments of $728,532
$160,000 @ 10% over 30 years = $1404 a month with total payments of $505,489
- It takes total payments of $728,532 over 30 years to borrow $480,000.
You would pay total Interest of $248,532 and principal of $480,000. That is $690.37 a month in interest cost on average to borrow the $480,000.