Can rates go lower? I know that mortgage rates tend to move more in correlation with bond prices (opposite correlation) than they do with Fed Rates. This week's news seemed to signal that the Fed Rates will not be cut again even though the economic news indicates a slight slowing in economic growth in future months. The Fed seems to think it has already reduced its rate enough to counter the slow-down without triggering inflation.
So where are bond prices going, and where will mortgage rates go? Rates are already about as low as they eve
r are (except in that crazy period of 2 years ago). So, what do the mortgage gurus of Active Rain think now?
Here's what I'm telling my clients about mortgage rates this week.
Thanks all!
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Way to lead me to another post......I'd click the link but I'm afraid you'll do it again and again and I'll be 20 clicks away from my homepage!!.....just kidding....great post and great lead in.
Ryan -- it should open in a new window or tab, so you shouldn't have a problem getting back! But, I'm really hoping for some insight from the mortgage guys on this one.
Ann
It is my belief that rates will stay stable for the near future. Whilst I agree with your description of the relation between bond yields, and mortgage rates, this is such an unpredictable, though not unexpected position that rates are staying steady to mask the actual, and potential future mortgage losses that we've not seen yet.
the current yield supports a much lower fixed rate than we're seeing today....you know, kind of like that crazy period 2 years ago?!
Yeah, the last few years seem to be messing with the bond price/mortgage rate correlation rule. Thanks for the insight, Bill.
I agree with Bill's comment that rates will stay fairly stable. Bill makes a good point..there is still a lot more fallout to come, and who knows what that impact will be. I'm also concere about the continuing narrowing of options for borrowers lending wise. Lenders are still cutting programs and changing guidelines, although not at the pace they were several months ago. I guess there's not much left to cut anymore lol
Ann
My Active Rain post today has a prediction from Mike in Tucson that rates will deteriorate in the next quarter. The 10 year bond fell below its support level of 4% for two days, and then bounced back up. What didn't get much press is that the 6 Month Libor, to which many ARMs are pegged, has been steadily inching up.
Rates aren't as much of a problem in this market as the fact that banks are knocking down appraisals and requiring buyers to (1) come up with more down money, or (2) find another house to buy, thereby killing the Real Estate Agent's deal.
Mike in Tucson
Ann - I think rates will continue to fall.... slowly --------- I have no doubt the Fed will cut rates in Dec .. the only question I think is how much
Hi Ann,
Our 30 year fixed rates just fell to 5.75%. However, everytime the Fed lowers the Discount Rate the 30 year rates increase for the short term. What the public dosen't understand is that the Fed controls the Short Term Rates NOT the Long Term Rates. The Long Term Rates work off of fear of inflation. When the Fed lowers the discount rate they mention that they are worried about inflation and the Long Term Rates go up.
I feel that the long term rates may fall a little more but they are very low right now.