mortgage rates

Want More Proof That The Fed Doesn’t Control Mortgage Rates?

September 21, 2007

For more proof that the Fed does not control mortgage rates, consider this: In the immediate aftermath of the Fed’s decision to lower the Fed Funds Rate by 0.50%, mortgage rates improved by about 0.125% on average. But, in the two days since, mortgage rates have not only given back those gains, but have approached […]

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How Prime Rate Relates To The Fed Funds Rate

September 20, 2007

Prime Rate is currently 7.750%. Prime Rate is the “shorthand” name for the Wall Street Journal Prime Rate, a variable interest rate that is used in pricing many types of consumer loans. These loans include: Home equity lines of credit Credit card loans Auto loans Prime Rate’s variable nature is tied to the Fed Funds […]

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How The Fed Will Disappoint No Matter WHAT It Does Today

September 19, 2007

It’s all eyes on the Fed today; the market anxiously awaits the central bank’s 2:15 P.M. ET press release. Some of the market bias towards a 0.50% rate cut has decreased in favor of a 0.25% cut.  This shift is largely psychological. Markets are trying to “get inside the head” of Fed chief Ben Bernanke, […]

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The Week In Review (September 17, 2007) : What To Watch For

September 17, 2007

The volatile path of mortgage rates last week followed the changing expectations for Tuesday’s Federal Open Market Committee meeting. The FOMC sets the Fed Funds Rate, a benchmark interest rate upon which Prime Rate is based. According to Federal Funds Rate futures, there is a 94 percent chance that the Fed will lower the FFR […]

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What Would It Take For YOU To Feel The Pinch Of Higher Gas Prices?

September 14, 2007

As crude oil crossed $80 a barrel Thursday, the Wall Street Journal ran an interactive poll with its readers. What sustained price for gasoline would cause you to cut back on other household spending? The graph above shows the on-going results of the non-scientific study.  You can chime in, too, at https://forums.wsj.com/viewtopic.php?t=805. As consumers cut […]

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What The Price Of Gold Says About The Economy

September 13, 2007

Headlines today read that the value of gold is nearing its all-time high (adjusted for inflation).  The lay people would ignore this story, but those in the know understand that the price of gold is usually reflective of the state of the global economy. The spot price of gold tells a lot about investor psyche […]

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Why Mortgage Rates Fell BEFORE The Fed Meeting September 18

September 12, 2007

Mortgage rates “come from” one place only: the prices of mortgage bonds as determined by investors. The higher the price, the lower the corresponding return, or rate. Bonds — like stocks — are traded as securities.  An investor may buy Microsoft stock if he thought the company’s future looked bright, and he may buy mortgage […]

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Explaining Why Per Diem Is Not A Closing Cost

September 11, 2007

Line 901 of a mortgage settlement statement is commonly confused for a closing cost.  It’s actually an “advance payment” on the mortgage. Often called a per diem by mortgage professionals, line 901 itemizes a borrower’s prepaid mortgage interest charges due at closing.  The total amount due equals the daily rate of interest multiplied by the […]

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The Week In Review (September 10, 2007) : What To Watch For

September 10, 2007

Weak employment data pushed mortgage rates lower last week.  Against expectations of 110,000 new jobs created in August, last Friday’s Non-Farm Payrolls report showed a loss of 4,000 jobs. The story made headlines all over the country this weekend but its connection to mortgage rates is not always clear.  Here’s how the jobs report relates […]

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How Today’s Jobs Report Impacts Mortgage Rates

September 7, 2007

This morning, the government reported that the U.S. economy lost 4,000 jobs in August.  Led by losses in manufacturing and in construction, this is the first time since 2003 that the economy has failed to add jobs in any given month. Markets had been expecting a job gain of roughly 110,000, but many players on […]

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Traders Predict The Fed Funds Rate Future Using Options

September 6, 2007

The Federal Open Market Committee meets September 18 and traders are aren’t quite sure what to expect with respect to the Fed Funds Rate. Will the FFR stay unchanged?  Will it FFR decrease?  If it decreases, by how much?  These are questions that are perplexing market participants. Luckily, we can measure how the market is […]

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An Appetite For Jumbo Loans Returns

September 5, 2007

Yesterday was a rather drab day in mortgage circles — not much happened and mortgage rates idled.  The bigger story was how liquidity appears to be slowly returning to some areas of the beaten-down mortgage market. Specifically, liquidity is returning to prime, fixed-rate, full documentation jumbo loans and pricing appears to be improving (slightly). The […]

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The Week In Review (September 4, 2007) : What To Watch For

September 4, 2007

Federal Reserve Chairman Ben Bernanke took the pulpit Friday in Jackson Hole but his remarks made little impact on mortgage bond trading. The Fed is aware of economic issues related to housing and mortgage debt, Bernanke said. He implied that the Fed wants more evidence that inflation has slowed before taking more drastic measures to help […]

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The Fed Descends On Jackson Hole, The Market Won’t Get What It’s Looking For

August 31, 2007

Today is a holiday-shortened session but that doesn’t mean that the markets will be on vacation. The day’s big event is Federal Reserve Chairman Ben Bernanke’s speech at the Fed’s annual symposium in Jackson Hole, WY. Investors will dissect every phrase looking for clues about the economy and housing. More importantly, markets want some advance […]

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How The Stock Market Rally Changed Mortgage Pricing For The Worse

August 30, 2007

Mortgage rates unexpectedly increased yesterday afternoon as the U.S. stock market staged a late rally. By the end of the day, the Dow Jones Industrial Average was up 1.9 percent, or 247.77 points. This is a typical pattern. When stocks are moving higher, investors want to ride the wave and look for sources of cash.  […]

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How Credit Cards May Be Replacing Home Equity As A Funding Source

August 29, 2007

As mortgage guidelines loosened between 2002 and 2006, homeowners often used their home equity to retire credit card and other consumer debt.  They did this by increasing the size of the mortgage and taking “cash out” from their home. As you’d expect, this type of mortgage transaction is called a “cash out” refinance. Well, now […]

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What’s The Existing Home Sales Report Got To Do With You? Nothing.

August 28, 2007

When the National Association of Realtors® releases its monthly Existing Home Sales report, people tend to watch every word, fact and figure in the statement in hopes of decoding the real estate market. It’s all wasted energy. It’s impossible to use the NAR report in everyday living because the NAR report is a national story.  […]

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The Week In Review (August 27, 2007) : What To Watch For

August 27, 2007

This week is data-heavy so markets will finally get to focus on fundamentals instead of fear. For the past two weeks, uncertainty about the economy has led to psychologically-driven mortgage interest rate movements. Rising defaults devalue mortgage holdings and many investors are now expecting the defaults levels to rise even more. When defaults exceed expectations, […]

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Why Private Mortgage Insurance (PMI) Is Suddenly Popular

August 22, 2007

Suddenly, Private Mortgage Insurance is back in vogue.  If only by default. The story background is well-documented in this Bankrate.com article from 2002.  The article is five years old, but it still raises some salient points. What the article doesn’t highlight is that second mortgages such as home equity loans are typically sold to Wall Street, […]

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Like The Fed Funds Rate, The Fed’s Discount Rate Does Not Control Mortgage Rates

August 21, 2007

Friday, the Federal Reserve lowered its Discount Rate by 0.50% in an effort to preserve liquidity among our nation’s banks. This has nothing to do with mortgage rates that people like you and I get for our homes.  Well, not directly at least. The Discount Rate is the rate at which banks borrow money from the […]

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