Your Questions About Mortgage Rates News

John asks…

Why are mortgage interest rates rising with such bad news about the economy?

admin answers:

The above answers are BEYOND STUPID because, based on their logic, NEW lenders who do not have loses to recoup can enter the market and clean up. They can underprice existing lenders and drive out the old players. The basic piece of knowledge that they are missing is that interest rates for a loan with given characteristics are a COMMODITY!

The interest rate (lets call it r) on a given loan has three or more components:

r = risk free real interest rate + inflation premium + credit risk premium.

Other components may include premia for prepayment risk, interest rate risk, foreign exchange risk, sovereign risk, and the list can go on.

When the economy takes a turn for the worse, the ability of borrowers, on average, is impaired. To compensate for this increased credit risk, lenders increase the credit risk premium, which in turn causes a one-for-one increase in the interest rate r.

Joseph asks…

If fed cut rates, would mortgage rates also go down?

I know the mortgage rates is correlated to the 10 yrs note rate. But what about when u hear about fed cutting rates. Does that also affect the mortgage rates? I heard on the news that the fed will cut more rates because of a fear in recession. So if fed cut rates, would mortgage rates also go down? What else affect mortgage rates beside the things I mention above?

admin answers:

When the Fed cuts prime rate it has no directo correlation to mortgage rates. To go one step further, depending how the investors on wall street view the FEDS decision it could make rtes swing either way. Example, last time the Fed cut rates, the investors wanted a 1/2 opint cut, they got a 1/4 point cut, mortgage rates went up. There are alot of different variables that effect mortgage rates, employment reports, oil prices, etc. And to a certain extent what blows up in the Middle East on any given day. As a general rule, a cut in the Prime Rate effects, HELOC’s, credit cards rates, and auto loans.

Sandy asks…

what is the latest status of freezing ARM mortgage rates?

I had heard a few weeks ago that the government was trying to implement a program to temporarily freeze adjusting mortgage rates to help home owners from potential foreclosures. Any news on that, and what is the process to apply for this freeze if applicable

admin answers:

C’mon, this was an initiative GW thought was a good idea. When’s the last time he did ANYTHING intelligent?

This was a useless gesture by a lame duck president trying to look like he did SOMETHING fiscally responsible since he squandered the first budget surplus since Jefferson was in the white house.

For the most part, this will do little to help anyone who really needs it.

Ruth asks…

Is it true? mortgage rates may fall a bit more to catch up with the Feds cuts?

I saw a guy on a morning news show saying we can expect rates to go down and hold steady for a bit longer in the near future. The past few days rates have went up and down every 5 minutes. Will we see 5.2% on a 30 year fixed soon?

admin answers:

No, it is simple supply and demand. The spreads on mortgage backed securities have widened which will cause rates to increase. You can secure a 5.5% 30 Year right now, it just depends on the day and time that you lock. If you are thinking of refinancing and want a rate below 6%, I would suggest locking something in now.

William asks…

Why is Freddie Mac reporting the lowest mortgage rates since 1971?

Didn’t they learn anything from the 2008 meltdown?
Mortgage rates sink to lowest level on record
“The average rate for 30-year fixed loans sank to 4.69 percent, from 4.75 percent last week, mortgage company Freddie Mac said Thursday.”
Hey, Bonnie. What’s up?

admin answers:

Because Bernake is keeping the index rates and the short term rates artificially low.

Once those rates return to normal, the mortgage rates will go up as well.

Here’s another little tid-bit. Inflation will go up too. Right now, inflation is in a single digit of 2.

Yet, the misery index is at 11.72 up from 7.42 under Bush.

Misery Index is Unemployment + Inflation.

The number is being driven by Unemployment almost exclusively.

If Bernanke raises his rates, the sure inflation spike will cause the Zer0bama administration to implode.

BTW, New home sales are at their lowest levels since 1962.

Misery Index (11.72) = Unemployment rate (9.7) + Inflation rate (2.02)

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