Dennis' Mortgage Blog

Question of the week:  How long will the rates stay as low as they are?

Answer:  Quite a while given the economic news from the past month or more.  While we may see some minor week to week fluctuations in mortgage rates, over the next several weeks there appears to be no reason for interest rates to rise. 

Mortgage rates are tied pretty closely to long term securities and bonds.  Today Fed Chief Ben Bernanke gave a speech on the economy in which he said “Should further action prove necessary policy options are available to provide additional stimulus.”  Well about the only additional stimulus the Fed can provide is to buy more debt and push long term rates even lower—this is because the short terms rates are near zero.  The Fed already holds $1.7 Trillion in mortgage and U.S. government debt, apparently that may not be enough and purchasing more government debt could be on the way. 

Should the Fed push government rates of return low enough investors turn to mortgages as another place to make long term investments.  This activity leads to stability at our very low mortgage rates, or perhaps room for some more decline.

Have a question for me?  Ask me!

Numbers aren’t pretty.  Well they can be, like numbers on a winning lottery ticket. But the numbers I speak of are not pretty.  GDP for the 2^nd Quarter revised down by the Commerce Department from 2.4% growth to only 1.6%.  473,000 new unemployment claims.  Existing home sales down 27.2% and new home sales down 12.4% in July.  Purchase mortgage applications down 38.8% from the same week one year ago.  These numbers are why Bernanke is announcing the Fed will do whatever it can to get the economy moving at a faster pace the 1.6% growth.  And why Americans and corporations are hoarding and not buying.  Uncertainty of the economic future of the household or company means no buying or expansion.

The Fed cannot solve this economic malaise.  Confidence does not emanate from financial bureaucrats, and for the past few years it has not emanated from our elected leaders either.  I get the sense there is a wait and see attitude among the American consumer and business leader to see what happens in November at the polls before they open up their checkbooks and begin to spend.   If this is true expect continued declines in home sales, and possibly mortgage rates, for the next few months.

Rates for Friday August 27, 2010:  Rates were doing pretty good this week until today when we saw a big sell off and rate re-pricing through the day increasing costs.  We are flat from last Friday.

FIXED RATE MORTGAGES AT COST OF 1 POINT*

30 year conventional 4.00%                           Flat

30 year conforming-jumbo 4.375%                           Flat

30 year FHA    4.00%                                     Flat

30 year FHA jumbo 4.375%                          Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. 

Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment with an impound account for taxes and insurance and a minimum FICO score of 740; APR is not quoted as it is dependent upon specific loan amounts, lenders and services selected.  Numbers provided are for comparative purposes only.

Enjoy your week.  We are headed out of Southern California for some R&R.  Have the dog-sitters, house-sitters and business-sitters all in place!  If you need assistance on a mortgage issue between today and September 6^th my voice mail and email responses will have appropriate contact information, otherwise we’ll be back in a bit over a week.

Have a great week,

Dennis