The ups and downs of interest rates and what they mean for buyers

The following is an article submitted by Mortgage Advisor Steve Nimmer.

It seems like every week we hear news about fluctuating mortgage interest rates. They're up, they're down, they remain unchanged...it's a lot to digest. Educating buyers about how mortgage interest rates work and how changes in rates can affect their loans in process can prove invaluable.

Many factors can influence mortgage rates. The role of the investor, bond prices/yields, other market-driven and policy-driven rates, and lender competition all play a role in determining mortgage interest rates.

Investments
Mortgages are one of the many investment products on the market today that investors "purchase" to realize a profit. Investors, such as Fannie Mae and Freddie Mac, buy mortgage-backed securities, which compete with other investment products in the marketplace and are influenced by the current Treasury bond yields. Mortgage-backed securities also provide fixed coupon payments to investors similar to bonds, but carry more risk and often better returns.

Other Rates
In addition, many other types of interest rates affect mortgage rates. Rates on bonds and securities go up in order to attract investors and the prime and LIBOR rates go down in order to attract borrowers. The Federal Reserve also sets specific rates to ensure stability and balance in the economy, and while the Fed does not set specific targets for mortgage rates, it does indirectly end up influencing them because these rates tend to move in the same direction as other financial interest rates.

Lender Competition
Lenders also compete against each other, balancing what their investors want to buy against what a homebuyer is willing to pay – and what the competition is offering.

Contact me today for more information about interest rates.

Steve Nimmer
Coldwell Banker Mortgage

(912) 604-3834
NMLS #: 186680

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

Refinance to plan for employment uncertainty

I had lunch yesterday with a mortgage broker, a digital advertiser and a flooring wholesaler. Apart from Thanksgiving and Disney World plans, conversation mostly concerned the regulations that are published as the Patient Protection and Affordable Care Act legislation is turned into Treasury code. Everyone there except for me (being self-employed) is concerned about the potential impact on their employment.

If your employment contract is likely to be renegotiated to comply with the Patient Protection and Affordable Care Act, it is an idea to refinance your property NOW.

You could reduce your monthly payment and capture low interest rates for the next 20 - 30 years. If you are concerned your hours may be cut to 28 per week, that $200 month savings on your mortgage will come in handy!


Lenders I recommend:

For residential:

Kirsten Ray, IKON Financial
9 one two-354-eight 555

400 Mall Blvd, Ste G
Savannah, GA, 31406

Lucy Bukowiec, BB&T Mortgage
912-9 two one-8752
http://www.bbt.com/lbukowiec

326 Mall Blvdsavannah, ga, 31406
United States

For commercial:

Deepika Paul, EVP, United Community Bank
912-2 three five-3147

8201 White Bluff Road
Savannah, GA, 31406

Anne-Marie Jones, First Citizens Bank
912-23 one-two 194
13 E. York Street
Savannah, GA, 31401

And the attorney to handle it:
TJ Hollis, Lee Black Rouse and Hollis
Nine one 2-355-0023
7395 Hodgson Memorial Drive.
Savannah, GA 31406 

 

A. Joseph Marshall
Coldwell Banker Commercial
Commercial Real Estate Advisor
Savannah, Ga

Are mortgage rates rising?

(Originally published October 2010)

YES!

The Fed's second round of Quantitative Easing (QE2) has pushed mortgage rates higher in the last 3 weeks. But why? Several reasons. As investors look ahead they see little reason for mortgage rates to decrease and four possible causes for them to increase.

These causes include stronger than expected economic data which could lead to stronger economic growth. Stronger growth decreases the need for additional Fed stimulus, and it generally leads to higher inflation.

Domestic and foreign opposition to QE2 means the Fed will most likely not expand the program, meaning that the Fed will face strong resistance to an expansion of the program. Investors had viewed the $600 billion figure as a first step which would likely be increased in the future. Stronger economic growth and opposition to quantitative easing reduce the likelihood that the program will be increased and possibly could cause the program to end early.

Printing an extra $600 billion weakened the value of the dollar relative to other currencies. When foreign investors sell US securities, they must convert the US dollars they receive into their own currency. If the value of the dollar falls, then the value of their US investment falls in relative terms to their own currency. As a result, foreign investors may reduce their purchases of US securities, including mortgage-backed securities (MBS), which would cause yields to increase. This fear of weaker foreign demand hurt mortgage rates.

China also announced a rate hike which requires yields to rise in other foreign markets to remain competitive.

The good news is that current inflation levels are low and the Consumer Price Index data released mid November shows annual core inflation at a record low in October.

In conclusion, we shouldn't be surprised that mortgage rates are rising; because they've been extremely low they are positioned to increase very quickly!

Thank you to Jeffery Grossman in SunTrust Mortgage and MBSQuoteline!