Jump to content

The future of mortgage rates?


Stainless_Steel
 Share

Recommended Posts

So what does everyone think is going to happen with mortage rates now considering if the feds raise rates in there next two meetings this year?

Doesn't mortgage rates go up and down by short term yield bonds or something like that? It seems like everytime the feds raised rates this year the mortgage rates have gone up. Since they paused this time mortgage rates have also. It seems like with the housing market not being so strong right now would effect it somehow.

I'm new to this and trying to learn as much as I can. I know that there is no way for anyone to predict what the economy is going to do, but please just give your opinion of what you think is going to happen. One minute I here they are not raising enough(inflation bla bla bla) and thet next I here they're raising too much(recession.....)

Link to comment
Share on other sites

Its hard to gauge since the fed has less and less control over the long term bond prices anymore. The US has flooded the global markets w/ treasury notes in recent years to fund its deficits. What drives mortgage rates these days is more supply and demand of global investors willing to lock in their cash at the yields being offerred. The Fed can push the long term yields up by raising the short term yields (they control the overnight lending rate). Since investors strongly prefer locking money up for shorter times rather than longer (less risk of inflation eating into their yields), investors demand higher rates for the longer term bonds, and long term yields have to rise at least as much as short term bond yields to keep up demand. So the fed can "muscle" up the long term bond yield by forcing up the short term yields. Occasionally, short term yields rise higher than long term yields (inverted curve). This indicates that the market is betting that there will be a recession and the fed will lower rates in the near future.

Right now the fed is in a tough spot- inflation (mostly through commodities) has crept in around the globe, and the US is trying to slow our economy just enough to cool prices while not cause a recession- "thread the needle". Tough to do, but so far so good. Corporate earnings are very high, consumers still spending, and labor markets are in the sweet spot.

IMO, rates have topped out for now- but may move north in the future due to the fact that Japan has now raised rates for the first time in 10 years (end of the carry trade deficit), and Europe is starting to raise rates too. US bond yields will have to eventually rise to continue to fund our deficits or we must stop running deficits (and that's not likely). There are so many moving parts that control global bond prices that its never a sure bet, but indications are that they may slowly continue to rise.

However, the good news is that yields have dropped significantly in the past few weeks due to Bernanke pausing last week- and mortgage rates typically move in parallel (bond yield + margin for the lender). Therefore, now isn't a bad time to lock-in overall. Historically speaking, rates are still great. Its a 50/50 bet that you'll see better rates in the next few years, but there is no time like now if you are shopping for a mortgage. Besides, many home markets have softened, and you have plenty of room to negotiate on the price and ask for seller concessions. If you wait for mortgage rates to drop, the housing markets may become very strong and the price of the house may also be much higher and more than make up for the slightly lower mortgage rate. So overall, go for it if you are looking to buy a home to live in!

Link to comment
Share on other sites

  • 2 weeks later...

Mortgage Bankers Association, 23-Aug-2006:

Borrowing costs on 30-year fixed-rate mortgages last week tumbled to an average 6.38 percent from 6.54 percent in the previous week. The rate compares with the four-year high of 6.86 percent, touched in mid-June, the MBA said.

Link to comment
Share on other sites

  • 3 weeks later...
Anyone know of any companies willing to refinance when your credit is much less than perfect?

Depends.

How bad is your current rate? If you've got predatory rates (above 10%) NACA will refi you. they're not score driven. If you can prove (budget) you can make the payments, they'll likely refi you. They have some requirements, but worth looking at - www.naca.com

Nope. I'm not affiliated with them and not going through them myself, but if you meet their requirements, they may be a good match.

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
 Share

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.. For more information, please see our Privacy Policy and Terms of Use.