Did You Miss the Low Mortgage Rate Bus

Don’t worry if you did, they will come back? Maybe?

If market analysis tells us anything; the individuals who play in the market are creatures of habit.  Given we are headed into a weekend coupled with a Holiday shortened week; we could see the flight to security begin accepting boarding passes Friday.  What does this have to do with rates?

During bearish times Investors will migrate to security, with weekends brings the fear of the unknown.
(Terrorist Attack, Geo Political Disturbance and so on…)

Although U.S. Treasury do not dictate the price of MBS, they are both safe havens for investors, thus increased demand will push yields lower.

This may come as a shock to many borrowers, but it’s absolutely true. Mortgage interest rates are not set by the Federal Reserve and, contrary to popular belief, mortgage rates are not directly tied to the yields of US Treasury bills, bonds, or notes – including the 10-year Treasury Note. That’s right. Despite what you might hear in the media, mortgage interest rates are actually set by lending institutions, and are based solely on the performance of mortgage-backed securities.

Local media and inexperienced loan officers everywhere have suggested that the 10-year Treasury Note, a government-backed security, is directly tied to mortgage interest rates, that the two are separated by a specific interval – which is simply not true.

This snippet from a recent BankRate article shows the pure fallacy that even high fluent individuals make:

On historical Note (no pun intended) the 30 YR and 10 YR Treasury Notes are producing yields last visited when they were introduced  5/2/1973 (Friday Close 12/19/2008)
10 YR T Note – 2.13%
30 YR T Note – 2.58%
FNMA 30 YR 4.5% $101.72

Going forward, mortgage rates may fall, or they may not. We can’t possibly know. But we’ve now seen the pattern 3 times now — when mortgage rates plunge like they did Tuesday, they rarely stay that low for long. When you find a rate you like, get in and get locked as soon as possible.
Sleeping on it for even one night may end up costing you dearly.
Feel FREE to contact me to discuss your current Mortgage.

Image cut from: http://www.bankrate.com/brm/news/mortgages/20081217_refinance_rate_drop_a1.asp

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