Rate Watch Continues

Interest rates jumped this week from 4.75 to 5.25 within days. Despite the fed stating his intention to keep buying bonds and keep interest rates low, the bond market is responding to the knowledge that all of the planned stimulus packages and bailouts will have to be paid for with more and more bonds. The tremendous supply of new bonds will overwhelm demand resulting in lower prices and higher rates. Eventually, rates will head substantially higher.

Fear of future inflation has encouraged some of the selling in treasury bonds.
Only a renewed drop in the stock market may create another flight to the perceived safety of treasury bonds.
Any drop in rates to 5% or lower should be viewed as an opportunity to purchase or refinance.
Once this next flight to safety ends, I expect much higher rates.

Watching Rates

Bond yields are starting to head back down again-it's possible the fed is once again buying bonds to help control mortgage rates. Although the move in bond yields was significant today, expect the near term bond activity to be choppy. The stock market is showing more volatility as we work through the first quarter earnings season.
Eventually, I expect to see more buying in bonds with improvement in mortgage rates by early Spring. When this happens, this will provide an excellent opportunity for purchases or refinancing.

Getting Quotes from Internet Leads

Many internet sites advertise searching for mortgage rates on their sites. You can find an extensive listing of rates from different lenders in many states or you can choose to enter your information and then be referred to the lenders with the best rates.


WHAT YOU ARE NOT TOLD

You are often referred to lenders who have paid to receive your lead

The lenders who contact you may or may not have the lowest rates

The lenders on these lists are not blindly listed because they have the best rates- they are paying to be on these referral sites

The listed rates often look great - when you call you find out that the rate will be
higher for any number of reasons.



The internet can be a great search tool for information, but recognize the limitations of taking information from the internet at face value. This is the largest purchase you will make and manage in your lifetime- having a relationship with a local lender you can rely on is essential.

Mortgage Advice

The big push to refinance has started. Now that rates have dropped below 5%, everyone wants to lock in at the lowest possible rate. Although getting the best rate is important, trying to time the best rate in the bond market is like trying to catch the bottom of the stock market-almost within reach but usually impossible.

I always recommend that clients who want to make a purchase or refinance take the time to consult with a mortgage planner to discuss their financial needs and goals for the long term. Too often, people focus strictly on rate and may miss options that would help them reach their goals.


In these difficult economic times, I counsel my clients to purchase homes that they can easily afford based on their current income and savings. It is not wise to buy a home without keeping reserves for unexpected repairs. Whether you seek to purchase a home or refinance, I suggest you meet with a mortgage planner to decide what programs are best for you and what rate will meet your goals.

In December, rates briefly dipped below 4.5% for a few hours. Since then, rates have been creeping back to the 5% level. I expect rates to be volatile in the next few weeks with the possibility for lower rates later in the Spring. While some experts think rates may drop below 4.5%, others believe rates will drift between 4.5-5% in the near term and then skyrocket later in the year as all of the financial stimulus results in higher inflation. No one has a crystal ball-as a mortgage planner, I spend extensive time researching the trends and trying to pinpoint opportunity for my clients.

The best advice is to target what rates work for your purchase or refinance and to plan on taking that rate when available. Guidelines for approving mortgages are becoming tougher as banks want to make sure borrowers are qualified.

I will try to keep my predictions for rates and trends posted on a frequent basis. I am always available to answer questions or offer guidance.