The Window of Mortgage Opportunity Has Opened

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Mortgage rates were down on average last week. This represents a second week of falling home loan pricing, with 30-year fixed and 15-year fixed programs setting new records for low mortgage rates.

Now this week starts off with the Mortgage Backed Securities Bonds hitting and closing at a new all-time high (when the bond is up, the rates are down)! Both Monday and Tuesday bond sales closed at a new record high for the Fannie Mae 3.5 percent coupon.

What does that mean to me you might ask? It means that all the hype about the lowest rates in history over the last couple of years just got real. How real? How about a 30 year fixed rate loan at 3.5 percent, or a 15 year fixed rate loan at 3 percent? I have been in the lending industry since 1991 and have never seen rates close to this last more than a few hours, now here we are with these lasting several days. This is incredible!!

The next question is probably how long will they last? As I write this I wonder the same thing.

The last time I recall this type of frenzy was in 2002-ish and stocks were being pummeled and our President had just announced that we were going to war after the 9/11 attacks on US soil. All of that uncertainty is what caused investors to pull back from volatile stocks, and put that money into a more secure instrument like mortgage backed securities.

Well, here we are 11 years later and now investors find themselves once again looking at a very volatile stock market coupled with a major European economic crisis. So where do investors go when there is un-ease in the stock market? That’s right, back to Mortgage Bonds. Add to that the Fed’s continued policy to purchase mortgage bonds to help stimulate the housing economy and you find us right here with historically low rates.

What is the down side to this you ask? The arch enemy of Mortgage Bonds, known as “inflation," is starting to poke his evil little head out of the hole he has been hiding in for the last 10 years. Once inflation numbers start to elevate, the Fed will have no choice but to pull back from buying bonds to try to offset it. I do not think that means we will be back at 7 percent anytime real soon, but it does mean that 3 percent is going to be short-lived.  Another big point is that a 1 percent lower rate can mean an additional $7,500 in buying power for you on a purchase, or $150.00 per month right back into your monthly budget on a refi.

If you would like to find out what is available for your specific scenario, give me a quick call. It will only take a couple of minutes and does not cost a thing. I can be reached at (619)928-9762 or via email at robm@summit-mortgage.com

I look forward to hearing from you!

Rob McNelis
Senior Loan Officer
Summit Mortgage Corporation
NMLS# 830519
www.RobMcNelis.com

Licensed by the Department of Corporations under the California Residential Mortgage Lending Act