mortgage rates are going in the opposite direction
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Financial Planning - Financial planning in general. (Moderated) 

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mortgage rates are going in the opposite direction sid 01-30-2008
Posted by sid on January 30, 2008, 5:16 pm
I almost locked in a low rate 8 days ago for refinancing my mortgage
(7/1 ARM). But I chose to wait for even lower rates end of the month.
Today the Fed lowered fed banks rate by another 0.5%. I call my loan
officer and to my horror find out that rates have been going up since
last wednesday and it is up by nearly 0.75% today comapred to early
last week!!! He said something about bonds selling off and people
getting into stock market. I couldn't believe it. Is it possible that
we have seen the lows of mortgage rates for a while now?


Posted by on January 30, 2008, 5:42 pm
> I almost locked in a low rate 8 days ago for refinancing my mortgage
> (7/1 ARM). But I chose to wait for even lower rates end of the month.
> Today the Fed lowered fed banks rate by another 0.5%. I call my loan
> officer and to my horror find out that rates have been going up since
> last wednesday and it is up by nearly 0.75% today comapred to early
> last week!!! He said something about bonds selling off and people
> getting into stock market. I couldn't believe it. Is it possible that
> we have seen the lows of mortgage rates for a while now?

On average, changes in the Fed Funds rate (FFR) (what the Fed
controls) and the 10-year bond yield ((ticker TNX) are positively
correlated, but they can become negatively correlated (FFR down and
TNX up) if Fed rate cuts cause the market to think the Fed is being
"too easy", which will result in higher inflation. Gold hit a high
today on the news of the 50bp cut.


Posted by jIM on January 31, 2008, 9:09 am
>>But I chose to wait for even lower rates end of the month.
> > Today the Fed lowered fed banks rate by another 0.5%. I call my loan
> > officer and to my horror find out that rates have been going up since
> > last wednesday and it is up by nearly 0.75% today comapred to early
> > last week!!! He said something about bonds selling off and people
> > getting into stock market. I couldn't believe it. Is it possible that
> > we have seen the lows of mortgage rates for a while now?
>
> On average, changes in the Fed Funds rate (FFR) (what the Fed
> controls) and the 10-year bond yield ((ticker TNX) are positively
> correlated, but they can become negatively correlated (FFR down and
> TNX up) if Fed rate cuts cause the market to think the Fed is being
> "too easy", which will result in higher inflation. Gold hit a high
> today on the news of the 50bp cut.

I think the issue (as pointed out in another post) was that people
jumped to lock in low rates. Give it time- the 1.25% drop in rates
will probably make it to consumers in about 2-6 months.

I am hoping to refinance as well, but am waiting to see 30 year fixed
rates at less than 4.5%. Current mortgage is 5.75%.


Posted by Bill Woessner on January 31, 2008, 9:41 am
> I am hoping to refinance as well, but am waiting to see 30 year fixed
> rates at less than 4.5%.  Current mortgage is 5.75%.

Do you really think there's a chance of that happening? Even back in
2003 when rates hit their all-time low, I don't think 30-year
mortgages got that low. Take a look at this graph from BankRate.com:

http://bankrate.com/brm/graphs/graph_trend.asp?tf=1800&ct=Line&prods=1&gs=275,250&st=US&c3d=False&web=brm&cc=1&prodtype=M&bgcolor=&topgap=&bottomgap=&rightgap=&leftgap=&seriescolor=

Looks like the lowest they got was 5.375%. That's a lot of discount
points to get down under 4.5%. :-)

--Bill


Posted by joetaxpayer on January 31, 2008, 11:03 am


Bill Woessner wrote:

>
>>I am hoping to refinance as well, but am waiting to see 30 year fixed
>>rates at less than 4.5%. Current mortgage is 5.75%.
>
>
> Do you really think there's a chance of that happening? Even back in
> 2003 when rates hit their all-time low, I don't think 30-year
> mortgages got that low. Take a look at this graph from BankRate.com:
>
>
http://bankrate.com/brm/graphs/graph_trend.asp?tf=1800&ct=Line&prods=1&gs=275,250&st=US&c3d=False&web=brm&cc=1&prodtype=M&bgcolor=&topgap=&bottomgap=&rightgap=&leftgap=&seriescolor=
>
> Looks like the lowest they got was 5.375%. That's a lot of discount
> points to get down under 4.5%. :-)
>
> --Bill

Great link, Bill. Looks like 4.8 - 4.9 as the low in 2002. But I agree,
we're not likely to go much below that. If I were a betting guy, 4.75 is
the bottom. Of course, with my 5.25% 15 yr, I'd be happy to refi to 4.5%
or so.

JOE


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