The End of Record Low Interest Rates

There is a lot of chatter these last few days about interest rates and where they may be heading. I have been saying for months...how can they get any better? If they do, you may see a .125% drop but nothing substantial. There is just no room for a large downward adjustment. That being said we have now had a few days in a row of rate (price) increases. This means that to keep the same rate quoted to you on Friday, it will now cost you more in closing costs.

Here is some great commentary from Sigma Research (they think the record low rates are going away for good):

Interest rates continue to increase, the 6th day in succession that the rate markets have experienced selling. The bellwether 10 yr note is now back to the level it was trading when the FOMC statement called for another QE move. The mortgage market and treasury market rallied sending rates down as much as 40 basis points on the 10 yr and 20 basis points on mortgages. Now there is apparently a concern in the markets that whatever the Fed may do next Tuesday won't be enough shock-and-awe to drive rates lower. The Wall Street Journal reported this morning that the Fed is likely to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months, in contrast to the central bank's purchases of nearly $1.5 trillion worth of bonds during the financial crisis. The report said officials want to avoid the "shock-and-awe" approach used during the crisis in favor of an approach that allows them to adjust policy over time as the recovery unfolds.

As the calendar ticks off closer to the easing move, designed to push long term rate lower, there is increasing skepticism that the amount of the easing move may not be what the original beliefs thought when the FOMC made that statement. Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said Monday that more expansive monetary policy was a "bargain with the devil." While there is a serious debate within the Fed about another easing move, it is still likely to occur but as we noted in past comments, traders are withdrawing their bets that the amount of the Treasury buying will be less than originally believed. While speculators are covering their bullish bets that rates will decline substantially, the Fed will ease and at worse will keep rates from increasing. The issue now is by how much and on what time frame? How the bond market will trade on the easing next Wednesday is uncertain, but we believe the market is coming close to the end of its bull market that has taken interest rates to historic lows.

Bottom line...if you are closing in the next 30 days I would take your medicine and lock. If you don't you may be in for a rough ride especially with the election surely to be a market mover.

Call me with any questions!

Adam Simmons
Crystal Clear Mortgage
www.CrystalClearMortgage.com
936-447-5626

Best Rates ever...and have been for a while

The news has finally hit the mainstream media. Rates are at the lowest levels in history when it comes to mortgage financing. 30 year and 15 year notes are in the 3% range if you are willing to pay for it in the form of points.

***My personal recommendation*** With rates this good take a slightly higher rate and have your lender waive all of your lender fees to lower your loan amount or lower your cash needed at closing. It is not worth it to pay points in our current environment. If you or someone you know is getting a quote with discount/origination points please send them to us and we will give them the deal they should be getting. The breakeven points on buying down your rate are far too long right now.

Of course these low rates are reserved for the top tier of credit borrowers with the lowest risk profile. Risk profile includes debt to income ratio, loan to appraised property value, credit score, etc. If you do not fall into the best credit/lowest risk sceario you will be subject to Loan Level Price Adjustments (LLPA's). Ask your lender if there are any LLPA's in your loan so you can understand the rate being offered to you.

Do you lock the rate or not lock the rate?? If you are being quoted a base rate below 4.125%, I think you're Gary Busey crazy not to lock it up. If your base rate is above 4.125%, there is room for you to float without seeing a big change in your borrowing costs, regardless of market data. Ugh. That means you should be locking every rate Crystal Clear Mortgage is quoting right now!

Adam Simmons
Crystal Clear Mortgage
936-447-LOAN