Currently browsing March 2008 monthly archives.

In 2008, Home Loans Are One Day Cheap And The Next Day Expensive

On March 28, 2008, in Interest Rates, Mortgage Educational Information, by Tyler Ford | Comments

Through last week, the S&P 500 Index advanced or declined more than 1 percent per day 28 times this year. The represents 52 percent of all trading days and is the most volatile measurement since 1938's 57 percent.

When mortgage rates change rapidly, it’s a fiscal challenge to shop for a home and/or home loan.

Lately, mortgage rates have been especially volatile, mirroring the wild moves of the stock market. 

Here’s how up-and-down stock markets have been in 2008: Through last week, the S&P 500 Index changed more than 1 percent per day on 28 separate days. 

This represents 52 percent of all trading days and is the most volatile measurement since 1938.

Mortgage financing is impacted by stock market changes because when money flows into stocks, it tends to come from bond markets.  And, when money leaves stocks, it tends to “gets parked” in bond markets.

Because mortgage bonds set mortgage rates, you can understand how stock market volatility can make it difficult to predict what home loan payments might look like.

Volatility is expected to continue for the next several quarters so if you see a mortgage rate you like today, consider locking it right away — it probably won’t last long.

Source
U.S. Stock Volatility Climbs to Highest in 70 Years, S&P Says
Jeff Kearns
Bloomberg, March 20, 2008

https://www.bloomberg.com/apps/news?pid=20601213&sid=av840GLwE4UA&refer=home

Making English Out Of Fed-Speak (March 2008 Edition)

On March 20, 2008, in Uncategorized, by Tyler Ford | Comments

The Fed lowered the Fed Funds Rate by 0.750% to 2.250% March 18, 2008.

The Fed lowered the Fed Funds Rate by 0.750% to 2.250% yesterday.

Because it is tied to the Fed Funds Rate, Prime Rate also fell by 0.750% yesterday.  Prime Rate is now to 5.250%. 

Holders of home equity lines of credit and credit card debt benefited from the change and will see lower interest costs in next month’s statements.

Mortgage rate shoppers didn’t.

In the statement above — as explained by The Wall Street Journal — the Fed expresses a growing concern of inflation from rising commodity prices such as oil.  In part, this caused the mortgage bond market to sell off immediately following the press release’s issue.

Mortgage rates rose close to a quarter-percent yesterday.

The Federal Open Market Committee’s statement leaves the possibility of future Fed Funds Rate cuts open.  The FOMC’s next scheduled meeting is a two-day affair April 29-30, 2008.

Source
Parsing the Fed Statement
The Wall Street Journal Online
March 18, 2008

https://online.wsj.com/internal/mdc/info-fedparse0803.html

Re-Approve Your Pre-Approval

On March 20, 2008, in Mortgage Educational Information, by Tyler Ford | Comments

Proceed with your home buying, but proceed with caution -- your pre-approval may be outdated

Since December 2007, mortgage lending guidelines have changed very quickly and often without notice. 

Some of the more well-known changes include:

  • Broad restrictions on stated income home loans
  • Broad restrictions on 100 percent financing
  • “Risk-based fees” for credit scores under 740

Some of the lesser-known restrictions relate to property type and occupancy status as well as debt-to-income levels and mortgage payment histories.

Because of the number of changes and their collective scope, home buyers should be prudent and get re-pre-approved for their home loan.

Even if you last spoke with your loan officer four weeks ago, it’s important to know how market changes could ultimately impact your home loan approval.

The market really is that different.  Talk to your loan officer about a re-pre-approval today.

Expect A Fed Funds Rate Cut This Afternoon

On March 18, 2008, in Interest Rates, by Tyler Ford | Comments

The Fed Funds Rate is currently 3.000 percent

The Federal Open Market Committee meets today and will issue a press release in addition to cutting the Fed Funds Rate at 2:15 P.M. ET.

The verbiage of the press release will be as widely watched as the rate cut itself because markets are curious about how far the Federal Reserve will go to lessen the impact of an economic recession.

With every Fed Funds Rate cut, recession becomes less likely, but the other side of the equation is that the probability of long-term inflation grows. 

Like recession, inflation can be bad for the economy, too.

The Fed Funds Rate now stands at 3.000% this morning and the FOMC is expected to lower it by 0.750% or more this afternoon.

Mortgage rates are rising today because cuts to the Fed Funds Rate weaken the U.S. dollar which, in turn, makes mortgage re-payments less valuable to investors.

How Gas Prices Are Impacting Mortgage Rates

On March 15, 2008, in Uncategorized, by Tyler Ford | Comments

According to Gasbuddy.com, gas prices are at an all-time high (March 11, 2008)

Gasoline prices reached an all-time, inflation-adjusted high yesterday, averaging $3.23 per gallon nationwide. 

According to GasBuddy.com, this represents a 25% increase in the last 12 months.

Higher gas prices are leaving Americans with fewer discretionary dollars to spend and that is playing a role in the U.S. economy’s slowdown.  It’s one reason why mortgage rates have stayed low despite steady upside pressure from inflation.

High gas prices are also a reason why Thursday’s Retail Sales data will be closely watched; markets will gain insight into whether Americans are cutting back on personal spending because of rising energy costs.

Retail Sales are expected to have risen by a slight 0.1%.  If the actual number is lower, mortgage rates should fall on recession fears.  If it’s higher, rates should rise.

(Image courtesy: GasBuddy.com)

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  • Tyler Ford: Great job Todd!
  • Tyler Ford: Seems as through the real estate market is picking up and home prices are stabilizing.
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