Are Rates Really Going Down? What’s Really Happening NOW…

If you've been following the news, you know that, in an effort to help the current real estate market come out of the whole, the Fed has started their program of purchasing Mortgage Backed Securities and has mentioned it will continue as needed. We also know that the media will (actually...already is) of course offer their own interpretation and most likely say "Great news...rates will go even lower because the Feds said they will continue their purchasing program...and rates will remain lower in the summer...".

Here's the deal...

The Fed is indeed buying Mortgage Bonds. What they've been purchasing is lots of Fannie Mae 30-yr 5.5% and 5.0% Bonds, which won't have much impact on our current home loan rates (go to http://www.newyorkfed.org/markets/mbs/index.html to check on the Feds Mortgage Bonds purchases). Buying those kinds of bonds is a very smart move. Why? Because 5.5% bonds actually represent outstanding mortgages with rates of 6 - 6.5%, which are the loans being refinanced at today's great interest rates.

Come On... Keep On Reading...

Because rates are still at historic lows, many of those FNMA 5.5% mortgages the Fed is buying will most likely be refinanced, thus giving the Fed a quick recoup of some of their investment. Pretty good move! AND this is likely the reason the Fed said they will continue with the program beyond June, if needed.

Bottom Line...

The Fed buying these higher rates coupons won't necessary help rates to move lower. It doesn't really impact the loans being generated in today's low rates market. Aha!

How Does It Affect You?

Some consumers are in a situation where it really does make sense to refinance right now and save, for example, $200.00 per month. But the media keeps insinuating that lower rates could be right ahead and consumers hold off the $200.00 saving now in the hopes they'll be saving another $25.00 - $35.00 in additional savings if they get a lower rate than the one currently being offered. We all know that rates could turn higher and in this volatile market, window of opportunities could pass by and very quickly.

Think About It...

EVEN IF rates go down and you can time the market perfectly, how much would they have lost by waiting? Just do the math. While they delayed, they lost the savings they could have gained by taking action soon. How long will it take for them to break even? At a $30.00/month pace it could take years to make up for what they lost waiting for months before the rate decrease (well...if that really happens). Besides if they refinance now and rates go down...they can always refinance later.

On Your Team,

Maria Marriott

www.MortgageMinutesAndMore

www.HomeBuying101Now.com FOR OUR UPCOMING FREE FIRST TIME HOME BUYER CLASS.