Bonds Looking Bright, Rates at Multi-Year Lows

Hope your day becomes sunny and bright. Mortgage rates certainly are sunny and bright. We are seeing the range of rates for various projects fall on both sides of the 5.0% point now. Rates are at a multi-year low close to 50 year lows in fact! (See the charts below.) And Signet has relationships with many residential and commercial lenders that are ready, willing and able to lend. The doors are open!

The outlook for Mortgage-Backed Securities (MBS) also continues to be sunny and bright. Remember that there are two key components that drive the long-term interest rates, inflation and supply-and-demand for MBS in the secondary market. We will have more news about the economy and its effect on inflation this week. With the economic news continuing to show recession inputs, the fear of inflation has really subsided. In fact, the CPI is due out tomorrow and the expectation is for the full measure to show a month-over-month 1.0% decline in prices. When you back out energy (oil) and food, the core number will possibly be -0.1% as well. This is good news for lenders who want to make sure they will still have buying power with their dollars when they get them back. With inflation in check, the only thing keeping rates above the mid 4's right now is the appetite for MBS among investors. With the Treasury about to buy up MBS, we are seeing continued strength among investors.

Watch tomorrow for the FED announcement of targeted Fed Funds rates. Right now most are saying it will drop 0.5% but there is a 70% chance it could be cut all the way down ¾ of a point to 0.25%, a record in recent times. This would normally add to fears of inflation but not with our current economic conditions. So we welcome the Fed Rate cuts. Other big news items that we are watching is the auto bailout (may spur a rally in stocks, dampening MBS demand) and the Madoff ponzi scheme secondary effects. Of course, it seems weekly surprises from Washington also have become the norm.

What does all of this mean to you, your friends and clients? Rates are now better than in years. Funds are more available and the timing is right. Signet Mortgage is ready to help you put deals together.