Locking / Floating Interest Rates - The Weekend Edition - Feb 2, 2008

ok - time to flagellate a deceased equine! (Beat a dead horse)

The more things change, the more they stay the same!

The Fed lowered the Fed funds rate by another 1/2 point this week. How did the markets react?

Overall - the FNMA 5.5% 30 year bond went up .066 or almost 7 bps - not even 10%. This translates into rates improving by .1% (If last week a 30 year mortgage could be had for 5.6%, then this week it would be 5.5%)

The stock market on the other hand (other than having 5 fingers) went up 500 points. So who wants to claim that a cut in the Prime leads to lower interest rates?

Your professional mortgage loan officer should know that it never does - in fact, lowering the Fed Funds rate has historically resulted in longer term interest rates getting worse!

News wise - Most news came in at expectations. The notable exceptions were Gross Domestic Product (GDP) and Non Farm Payrolls. These showed a bigger drop than expected - perhaps showing the Fed knows what it is doing.

Next week is relatively slow in economic news. Bonds will be taking direction from stocks as well as the usuall reactions to other unexpected news.

Past week's advice

Monday, January 28, 2008

Tuesday, January 29, 2008

Wednesday, January 30, 2008

Thursday, January 31, 2008

Friday, February 1, 2008

To learn why one should Float or Lock -

Check out Should I float? Should I lock? & Reasons to Float or Lock