Warren Buffett’s Recent Financial Transactions Indicate His Opinion That Mortgage Rates Will Increase In 2011

Warren Buffett’s Recent Financial Transactions Indicate His Opinion That Mortgage Rates Will Increase In 2011

Article by Total Mortgage

Does Warren Buffett, perhaps the world’s top financial expert, expect that mortgage rates will rise in the new year? His most recent bond trades seem to indicate that this is the case.

Berkshire Hathaway Inc. borrowed .5 billion by issuing fixed-rate bonds to pay back floating-rate loans. By securing fixed-rate loans at current interest rates and using that money to pay off floating-rate debt that might possibly go up in 2011, he, Buffett, is apparently betting that interest rates, including mortgage rates, will increase.

Many investors constantly look at every movement “the Oracle of Omaha” makes, and his decisions of late strengthen the view that mortgage interest rates will rise this year. One could say he is refinancing his fixed-rate mortgage, although he’s using corporate debt as opposed to a home loan.

According to Bloomberg, the fixed-rate loans Buffett issued is comprised of 0 million of ten-year notes paying 4.25% and 5 million of 3-year notes at 1.5%. Buffett’s company also issued 5 million of floating-rate bonds priced at 0.33 percent higher than the London inter-bank offered rate, which is a common financial index.

Buffett bought Burlington Northern Santa Fe, a railroad company, at the price of billion in November 2009, wagering that an improving economy will increase the railroad company’s value. At the time, he called the acquisition an “all-in wager” on the economy, Bloomberg reported. Look at current mortgage rates.

That insight is beginning to manifest itself as being ahead of the game. Recent data is pointing to a growing economic picture during the year. Manufacturing in the United States grew faster last month, December, than in the previous seven months. The manufacturing activity index, as from the Institute for Supply Management, rose to 57 in December, up from 56.6 in November. Any number higher than 50 indicates growth. Claims for unemployment last month fell to their lowest point since 2008 and were continuing to decrease for some time before. As confidence in the economy increases, investors are investing more cash into a rising stock market and selling back safe Treasury bonds. That makes Treasury prices fall and so their yields increase, which prompts mortgage interest rates to go up. Lock in your home loan

About the Author

Total Mortgage Services, LLC is an industry leading mortgage broker and lender headquartered in Milford, Connecticut. Thanks to the trust of thousands of customers from all around the county, Total Mortgage has continued to grow by stressing personal service and rapid responses, and has funded over billion in mortgage loans and are licensed in 21 states.

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