Arm rates resetting lower than current market rates
May 15, 2008
Home owners who have mortgages that may be adjusting in the next few months could be pleasantly surprised to find out their mortgage rates may actually be adjusting down. Their has been a great deal of speculation that the large number of arm’s scheduled to reset in 2008 would have a crippling effect on the housing market.
The Federal Reserve has worked agressively to try and restore the credit markes by reducing the Fed Funds rate down to 2%. While this has no direct correlation to mortgage rates, their is a correlation to other economic indexes such as the LIBOR. Most arms are now utilizing the LIBOR as the index of choice for future adjustments. This is good news for millions of home owners as the rates on the LIBOR have dropped in conjunction with rates on the Fed Funds rate. The LIBOR has several indexes including 1 year, 3 months, and 6 months. All three of these indexes are now under three percent. Most adjustabe rate mortgages have margins (amount added to index to determine new rate) of 2 to 3 percent. This essentially means that most home owners with arms will be adjusting under six percent if the market does not move significantly in the near future.
Long term fixed rate mortgage are still hovering around six percent so it would probably make sense to explore refinancing your mortgage if you plan to stay in the home beyond the next 12 months and want to have payment certainty for the long haul.
How could Yahoo stock effect mortgage rates
May 5, 2008
The stock market could be under pressure from the fallout of the Yahoo & Microsoft merger. So what does this have to do with mortgage rates? The connection is strictly tied with investment dollars and decisions. When the stock market is doing well and investors are purchasing equities you tend to see mortgage rates increase as investors pull their money out of the safer bond market and invest in equities such as stocks.
The flipside of this analogy is that when investors are concerned about the direction of their equity investments or perceive higher risk in the stock market they tend to invest into the bond market. When this happens you tend to see mortgage rates decrease. Their is not always a direct correlation between the ten year bond and mortgage rates but this is a common index that investors follow when they are trying to follow the direction of which mortgage rates are heading.
Home owners or potential home owners who are shopping for a mortgage and must determine whether or not to lock or float their interest rate can use the stock market to help gauge what direction interest rates are heading but should be cautious that no one can predict where rates are moving and economic and investor news comes out on a daily basis that can change the markets direction.
Bernanke catches up with rest of country
April 2, 2008
The U.S. economy has been a disaster for the better part of the past six months. If you listened to speeches by Ben Bernanke during that period you would have never heard the acknowledgement that the U.S. economy is in a recession.
This finally happend today! The Fed has cut the Fed Funds rate a full two pecent since the beginning of the year. Congress has issued rebate checks in the amount of one hundred and fifty billion dollars, but there has never been an acknowledngement that the U.S. economy was in a recession. The fact that the economy lost jobs in the month of February and one of the largest investment banks in the world Bear Stearns was facing near bankrupcy was a sure sign that things were not well on wall street. U.S. home values have decreased by over 10% over the past twelve months.
Bernanke’s testimony is curious as the stock market staged one of the largest rallies in U.S. history rising by almost 400 pts to start the second quarter of trading. Many investors believe that the worst of the credit crisis is now over and the U.S. economy, while certainly in a period of recession should begin to show signs of life by the third or fourth quarter of this year. The Fed chairman has been active in working to bring the economy out of it’s down turn, no matter how he wanted to phrase this in the past.
