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

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Subject Author Date
mortgage rates are going in the opposite direction sid 01-30-2008
Posted by Elle on January 31, 2008, 12:17 pm
>> 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.

Plus it's a balancing act. That is, the Fed simultaneously
is under pressure to undo the recent increases and raise
rates to counter inflation. The recent reductions had this
huge caveat in mind, from my reading. IIRC at least one of
the Fed governors voted against at least one of the
reductions because of concerns about inflation.


Posted by on January 31, 2008, 12:28 pm
> > 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:
..
> Looks like the lowest they got was 5.375%. That's a lot of discount
> points to get down under 4.5%. :-)

According to the Freddie PMMS, it hit 5.21% in mid Jun '03
with about 50bps in fees and/or points.

At that time, the ten-year treasury yield bottomed out
at 3.10% on Jun 13. The 5-yr treas was at 2.02 that day.

By comparison, today, the 10yr is at 3.61 and the 5yr is at 2.78.

I wouldn't be holding my breath on the 30yr mortgage
even hitting the low of Jun'03, no less plowing through
it substantially to reach 4.5%.

OTOH, the PMMS of Jan 24 showed the 30yr fixed at 5.48
last week. The update to it for this week should come
out any minute now (it's updated on Thursdays). However
the survey itself is conducted around Monday - don't
expect any reliable numbers based on todays' treasury
rates (or reflecting yesterday's rate cut) until next
week's numbers, not today's.


--
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Posted by Elle on January 30, 2008, 6:00 pm
The Fed's benchmark rate is a very short term rate. It's
really not supposed to affect long-term lending rates in a
predictable way. Long term being anything over about five
years, I'd say, based on the historic yield curve. A couple
of citations in layperson's language to back this up:

http://bankrate.com/brm/news/fed/main-Jan302008.asp

http://bankrate.com/brm/news/fed/how_soon_jan302008.asp?s=1&caret=4


Posted by bucky3 on January 30, 2008, 7:20 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.

IMO, this is what happened. When the fed cut rates unexpected by 0.75%
on 1/22, the mortgages rates dropped. The mortgage rates then
increased again due to demand (everyone locking in at the lower rate).
Today's 0.50% rate cut did not induce another drop because this was a
scheduled and expected rate cut, so it was already factored in
previously.

http://bankrate.com/brm/graphs/graph_trend.asp?tf=31&ct=Line&prods=379&gs=275,250&st=zz&c3d=False&web=brm&cc=1&prodtype=M


Posted by Bill Woessner on January 30, 2008, 10:56 pm
For what it's worth, I just saw this article on CNN.com. They say "a
drop in mortgage rates expected to follow [the Fed rate cut]":

http://www.cnn.com/2008/LIVING/01/30/fed.explainer/index.html

--Bill


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