How the Small Country of Cyprus Affects US Mortgage Rates

Mortgage Minute 3-19-13

News yesterday that Parliament in the small country of Cyprus that sits just outside of Greece had announced that they were going to "Tax" all deposits made under 100,000 euros 6.75% and all deposits over 100,000 euros 9.99% sent investors running. The big concern was not only for those that had money tied up in Cyprus banks, but for the precedence set by a Euro zone government that could be adopted by other struggling countries in the region. This news helped US mortgage backed securities to rally yesterday and finish just below a formidable ceiling of resistance at the 25 day moving average, but making up a great deal of the losses realized in the month of March for bonds. 

Today we opened with news that both "New Housing Starts" and New Housing Permits" were both up and later heard that the Cyprus Parliament voted to not implement it's proposed tax on depositors. This caused mortgage backed securities (which really guide home loan rates) to kind of pump the brakes a bit on their continued rally and also allowed stocks to regain some of the losses suffered yesterday. As the market closed today stocks ended mostly flat and the Fannie Mae 3% Coupon ended up about 14 basis points. More importantly, this put the Fannie bond closing above that very formidable 25 day moving average that will now act as a floor of support for us as we go into the results from the monthly meeting of the Fed. Notes of today's meeting will be released at 9:30am eastern time, and Chairman Bernanke will speak at 2:15pm eastern time. Though no one expects a change to the overnight rates controlled by the Fed, any underlying statements about continued buying of mortgage bonds and US treasuries will be studied closely and could cause a knee-jerk reaction in the market should any bold comments be made. 

I am going to recommend floating into the results of tomorrows meeting as we do have some support at the 25 day moving average, but will be watching the market closely for any changes.

If you would like to talk about your specific scenario or needs, please do not hesitate to call or email me directly.

This statement of current rates is not an offer to enter into an agreement for a loan at a specified interest rate, number of points or both. Current interest rates and discount points are subject to change at any time without notice to you. Stated rate examples were calculated using a $300,000 loan amount, 80% LTV and 720 Min Fico at the stated term lengths.  Licensed by the Dept. of Corporations under the CA Res. Mtg. Lending Act – 431-0421; Rates and charges in the advertisement do not apply to all loans made by the financial institution.

Rob McNelis
Loan Officer - NMLS# 830519
Direct: 619.279.6162
robm@summitmortgage.com
www.robmcnelis.com