Treasury drops $600 Billion into Mortgage Backed Securities, Mortgage Rates Fall

RATES! WHAT ARE THE RATES? MORTGAGE RATES! THE FED IS INFUSING MONEY! WHAT ARE THE MORTGAGE RATES? DOES IT MAKE SENSE TO REFINANCE MY REAL ESTATE LOAN? HOW CAN I MAKE OUT ON THIS NEWS?

Five times in the past year, Mortgage Backed Securities (MBS) have jumped up in price to this level. All of those jumps were short lived and four of them, were followed by dramatic losses in value. What does that mean?

It means that we have seen this type of activity before and mortgage rates have dropped in relation to the spike in MBS pricing because it is MBS pricing that determines the price of mortgage rates. Today's precipitous drop in rates was due to the announcement that the US Treasury department was purchasing $600 Billion in Mortgage Backed Securities. Wow! About time!

This drop in rates equates to a $27,000 savings in price...so why not buy now????? When they go back up...you would have to get a $27,000 price reduction to save the same amount as what rates would save you by buying today.

So, if you have been straddling the fence waiting for the low rates, now may be the time to jump in. Refinance, purchase, either one. Don't get left behind because you were waiting for the bottom. The only time you know where the bottom is, is when you have passed it. Mortgage interest rates are excellent.

authored by Fred Chamberlin, senior mortgage consultant, Eugene/Springfield Oregon, 541-342-7576