Will mortgage interest rates go lower?
This information comes to us from Wendy Paulus of Cherry Creek Mortgage in Dillon, http://www.wendypaulus.com. Wendy’s article warns that waiting for mortgage rates to go lower might not be the best strategy. Current rates are already good, and that you could start saving right away! Read on, and then consult your favorite expert for more mortgage or real estate advice!
The Fed’s been at it again, offering words that sound encouraging at first, confirming that their buying program of Mortgage Backed Securities is in full swing and will continue as needed. Of course, the media offer offers its own interpretation, saying “Good news, the Fed’s words on continuing their purchasing program mean that rates will continue to drop lower, and remain low into the summer …” But is this really what that means? Not so.
Here’s the truth
Yes, the Fed has been buying Mortgage Bonds, but if you look at what they are purchasing, its it’s a lot of FNMA 30-yr 5.5% and 5.0% Bonds…which won’t have much of an impact on present interest rates. Why? First, see the Fed’s purchases for yourself by hitting this link: Direct Link to View Fed Mortgage Bond Buying – http://www.newyorkfed.org/markets/mbs/index.html. So why is the Fed buying these Bonds? Well, it’s a very smart move for Fed, and maybe a little sneaky. 5.5% Bonds actually represent outstanding mortgages with rates of 6-6.50%, which are precisely the loans being refinanced at today’s great interest rates.
Stay with me here
With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. This is likely a big reason why the Fed said they could continue this purchasing program beyond June, if necessary. Bottom line? Buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today’s low rates.
Here’s the most important part
Sometimes we talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example. But others when they hear the media teasing about lower rates ahead, people decide to hold off on saving that $250 per month now, in the hopes of gaining another $30 per month with a lower rate in the future. Rates could go higher instead, and the current window of opportunity will be lost. Even if those clients are ultimately correct in timing the market, and eventually save another $30 per month ” think of what they have lost by waiting! While they delayed, they lost the savings they could have gained by acting sooner. In the example used, that’s $250 for every single month they waited. So even if they got lucky and obtained the rate they were looking for, it could take many months, even years to make up what they lost by waiting.
Don’t miss your opportunity to save! Talk to Wendy or another mortgage pro to understand what is at stake. Rates have already moved up .25% or more in the last few weeks.
“Welcome Home” is compiled using various industry sources by TheTeam@Elich.com. Butch Elich has been helping people with their real estate needs in Summit County for over 20 years. His team includes Associate Broker, Paula Parker, a Summit resident for 23 years. Find them on the web at http://www.elich.com, or at RE/MAX Properties of the Summit, 305 Main St., Frisco.
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