Mortgage Minute: Was October 2012 the Rock Bottom for Home Loan Rates?

Today ended with all three major stock indices's up big on the day, and the S&P 500 just 2 basis points away from setting a new ALL TIME high. This came mostly from more good news in the housing sector. The Case Schiller Index that surveys 20 of the largest metropolitan cities in the US reported that all 20 were up in value on a year over year basis with even New York showing gains (NY was the only city last month that did not increase). That was followed by news that new housing starts came in as expected at 411,000. 

Mortgage Backed Securities (or MBS's) closed the day down slightly, as they just can not seem to close above that 25 day moving average. This has me very concerned at this point since the news from the Euro Zone has been very negative which would normally be a boost to MBS's, coupled with the Fed's continued purchase of 85 Billion a month in MBS's and we are still trading in a downward trend. This tells me that even with all of this help, there is just no desire for what would normally be considered the quality investment of Fannie Mae Bonds. I mean let's face it, if you have over 100,000 Euros in your savings account right now in the country of Cyprus, you are about to have close to 10% of that money just taken from you by the government. This should have investors in Europe very concerned that other struggling countries may do the same and they should be looking for a more stable investment (which has historically been US Mortgage Backed Securities). This however is not happening. It looks like even foreign money thinks that these securities may be over bought by the Fed and are more afraid that the Fed may flood the market when they decide to put an end to their quantitative easing policy (whenever that may be).

That is why barring any major world financial disaster, I think the rates that we saw at the end of September, beginning of October 2012 may have been the lowest we are going to ever see. Though the rates of today are FAR from bad historically, they are definitely not as good as they were then. I think we are going to stay in the high 3's to low 4's throughout the rest of the year with rates moving up from there. 

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