Dennis' Mortgage Blog

The bond markets started the short week today in free-fall as mortgage backed securities finally stopped their decline (in price) resting on the 200 day moving average--putting us on the verge of more rate increases in the coming days.  Remember the teeter-totter for interest rates, on one side is the price of bonds and on the other the yield or interest rate; as the price falls the rate increases.  (This analogy can also be used for points vs. rates when locking in a loan, the higher the points the lower the rate, the lower the points the higher the rate.)

With the release of January CPI tomorrow we could see a crazy day in the markets.  If the number comes in "hot", meaning inflationary, expect bonds to plummet and rates to increase significantly, if it comes in medium we may see a slight dip in rates and if we CPI come in validating the media spin and politicians seeking office that we are in a recession already we will see a slight improvement in rates.

The problem with a strong inflation number tomorrow is that it will signify that the Fed was premature in the 1.25% cut in rates in January, as well that Congress and the White House were a bit overzealous on much of the economic stimulus package.  Thankfully much of the package, the tax rebates, will have little to know economic impact but at least they felt good about themselves for passing it.

What should help us in the mortgage industry, and those of you with mortgages, is the loan limit increases--even with the bump up in rates we should be able to assist many homeowners with high limits for conventional and FHA mortgages.

Keep checking this site for economic and rate information.  Or call to see how I can assist you.

Dennis

Tuesday, February 19, 2008