Where Are Mortgage Rates Going

The MBS’s or Mortgage Backed Securities continue to inch down and as a result mortgage rates are inching up. You will see in the snapshot of the Mortgage Bond Market below, the value of Mortgage Bonds are falling. Investors and/or Banks want to make 4% or more on any loan they fund so you can clearly see that a 3.5% mortgage bonds as illustrated below is no longer possible.

 MBS_Table

So where are rates headed, simply they are going up.  The Bond Market is moving in a negative direction slowly but if you want to maximize your purchasing power or refinance into a lower rate, you might want to speak with someone sooner than later.

Currently we have been enjoying extremely low rates with the Treasury is buying huge amounts of MBS’s.  The Treasury buying notes, at a lower face value than private companies, has Hedge Fund money sitting on the sidelines waiting for the Treasury to stop buying MBS’s.  You may have heard something of this in the local news about this but under the term of “tapering.”  Once this tapering begins then rates will most likely move into the mid 5% range for a 30 year fixed home mortgage.

From an historical view mortgage rates are great!  Even a 5% rate should be considered good as it was only 25 years ago a 10% mortgage rate was considered good so you have to put things in perspective.  It is human nature to want the best possible rate and sadly it is not always available.  So why is that?

If you think of Banks as car dealerships then the big picture makes more sense.  You would not take your Ford to the Chevy Dealer to be repaired, right?  Not that the Chevy Dealer could not fix whatever problem you had but rather they do not stock the parts and therefore the final cost would be more as they would incur additional expenses to get the job done.  And yes of Corse you would be the one paying for this additional cost. Many Banks and even some Direct Lender’s will try to stuff you into one set of guidelines which is not always the best fit for you.  So needless to say if you do not shop your rate you will not get the best rate available.

When rate shopping this is just my personal opinion here run end any conversation you have with a loan officer that speaks of A.P.R. matching your Note Rate.  I have spoken a lot about A.P.R. or Annual Percentage Rate and it is a horrible name for what it is.  Any Lender that is selling matching APR and Note Rate is most likely putting in a fee for a rate buy down to make this happen.  ARP is a figure that is easily manipulated for those of us in the mortgage business.  So you can see with the name a consumer can be easily duped.

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August 15, 2013 · 9:59 am

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