Mortgage Reel, What is impacting rates, February 27, 2009
Article by Seattle Mortgage Reel
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Hi impact news came from the Federal Reserve, affirming that the government will not nationalize banks. The two banks in question are CitiBank and Bank of America. However on Friday the 27th, news broke that their would be an investment of up to 36% in CitiBank in stock/shares.
How did this affect interest rates? What we are seeing now in the market place is floor and ceiling created for mortgage interest rates. We like to use the example of small business. If you owned a small business and you produced a product that had guaranteed buyers in the market place, would you sell your product at a discount? Most likely not, this is similar to the current initiative of the Federal Reserve. With now over 0 billion being purchased this year in mortgage back securities, which equates to billion per business day there would leave little reason for rates to fall much further. There will definately be days where rates do slide and we see them at historical lows of 4.5%, but we could also see them increase to 5.50%. For now since January first this seems to be the trading range. What does this mean for current and future home owners? It all comes down to timing in the market place. Days of loan officers guessing are over. Your loan officer/loan originator needs to be armed with the tools necessary to see how markets react to breaking news. And lets be clear breaking news is what is driving the market place. Mid day price changes in interest rates have become the norm. A word of caution to the home owner / buyer, if the loan originator tells you that rates are based off of the bond market, RUN!!!!
Getting back to the news. “Inflation is under control,” in the words of the Federal Reserve. For now this would translate to rates being so called stable. This would relate back to the 0 billion of mortgage back securities being purchased. When these funds are no longer available the question remains what how will interest rates react? That seems to point in the direction of inflation.
Be sure to catch the presentation done by CNBC on American Greed, aired as “House of Cards” this is a provoking documentary that will expose what really happened and how greed took over integrity.
Next week bears more economic data that will unfortunately bear bad news. Unemployment and ADP payroll numbers are due to be released. This will definatley cause more volitilaty in interest rates. Stay tuned to The Mortgage Reel for more updates.
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Mortgage Reel is committed to Inspiring, Educating & Empowering the Current & Future home owners of Washington. We are the first video mortgage blog commenting on what impacts mortgage & real