Vince Kingston

Yesterday mortgage rates had one of the largest one day increases in recent history.  Within 24 hours the 30 yr fixed rate went from 4.625% to 5.375%!  Procrastination just got expensive.  Luckily charting mortgage securities in real time indicated this massive worsening before it was reflected on lenders rate sheets.  This allowed me to lock all of my existing loans before any damage had been done.  
Why this massive volatility?  What about mortgage rates going forward?  For the answer we only need to understand simple supply and demand.  The Fed is attempting to sell $134 billion! worth of treasuries this week alone.  Treasuries are bonds just like mortgage backed securities and selling treasuries is how our government funds our current deficit.  When there is an added supply with no commensurate increase in demand, the only way you entice buyers is to raise the bond’s yield or interest rate.  Since all bond yields more or less move in the same direction, this caused mortgage rates to increase dramatically due to the relative yield increase on mortgage backed securities.  This supply “problem” has only begun as the Fed is slated to sell $3.25 trillion worth of treasuries by the end of the fiscal year 2009 to pay for the stimulus packages, mortgage backed securities repurchase programs, bank and auto bailouts, and TARP funds.  It’s important to realize that given this, there is very little chance of rates improving, and a high probability that they could continue to rise.  
However this is not all gloom and doom.  5.375% is still a wildly fantastic interest rate compared to the recent historical average of around 6.5%.  Now is the time to participate in these still low interest rates.  Procrastination still doesn’t have to be that expensive.  We may not see 4.625% again in the near future, but with all this volatility, you can bet that at some point rates will momentarily improve, perhaps to 5%, perhaps lower.  When that happens, I will be there, ready to lock in the next group of borrowers.
 
I am always available for your questions.  If you would like to have rates monitored in real time on your behalf, call me today.  I will float for your target rate and secure it the moment it becomes available.