Good morning! With the recent volatility in mortgage rates, it leads one to wonder which way-up or down? Lately, rates have been climbing although they almost always do during the summer. Lately, the predictions have been for rates to either decrease slightly (currently they're at 6.25% on a 30 year fixed O.A.C.) or stay the same. I concur.
It appears the Federal Reserve will leave short-term borrowing rates alone. There was a lot of speculation that rates might increase but it appears the greater concern is inflation at this point. I would bet the Fed. will leave rates alone for most of the balance of this year. Again, short-term rates have nothing to do with mortgage rates; it's just that what the Fed. does or doesn't do affects the stock market and this is a broad indicator of the direction of our economy in the future.
Us mortgage folk always wish for a market downturn as it means people are putting their money into safer havens such as bonds. As the bond market goes, so go mortgage rates. I think the mood swings will continue for the balance of this year and possibly into 2009. There still is plenty of shakeout in the real estate busines that needs to be done. Plus, I was reading this morning that experts are predicting that writedowns from mortgage losses may be 50% greater than originally predicted. Initially, the prognosticators thought there would be close to $900 billion in writedowns. Now they're saying the figure may be closer to $1.3 trillion. Expect a continued consolidation of financial institutions and for credit to remain tight.
I'm curious as to your thoughts. In the mean time, keep plugging. These are interesting and trying times but the professionals among us will emerge at the other end and be prepared for the next wave. Have a great day!
Paul
Paul McFadden
Possibly a bump down every now and then but look for rates to trend upward --->>> wayyy upward in the next 12 months
Mortgage writedown might end up being close to $1.3 trillion. THAT IS VERY SCARY. Who knows when this will be all over. But I know that the worst is behind us-I hope. Great post.
Lanre, I beg to differ. Unfortunately, the worst is yet to come. If you can, tell me what signals you see that point to the fact the worst is behind us? I hope your right but I really believe your wrong. Homebuilders will be the next to go. Then the regional banks. Strap your seatbelts on my friend and be prepared!
Lewis- I am with you on this. Rates will rise drastically and the worst has yet to come...by far.
You got it Bob -
I am keeping my company lean and mean and bringing on talent and experience looking for a place to ride out the storm. We all need to hold hands together for a bit. If you think your'e gonna make this alone, your wrong! When this CRISIS does pass, the people remaining will own the market.....
Thanks, Bob, for your comments. Although I think you're right about it being just the tip of the iceberg, I'm not sure rates will be way up. I guess you need to define way up. If it's more than a point, I'm not sure. All the signs seem to be pointing toward flat growth and, remember, if the stock market is off that's generally good news for mortgage rates. I would bet the market will be off, possibly for the next couple years. The reason I say that is it's almost uncanny that when a new President is elected they have to deal with an economic downturn their first couple years. We'll definitely see. in the mean time, there's always opportunity; people are always buying real estate and need a loan to make it all happen.Take care.
Hi Lewis: We'll see if your somewhat dire prediction comes true. Obviously, we'd all like to get back to sunnier times but I agree with you, it's going to take some time.
Paul
Thanks, Lanye. Yes, that's a very big number. Obviously, it's going to take a little longer than we all thought to have this work through the system. The comments I keep hearing are "I had no idea how bad it was". That's probably true. We are definitely living in interesting times!
Paul
Bad Moon 'a risin'. Logic points to higher rates through the summer...the RBS alert on inflation over the next few months is ominous and real.
However...consider the illogical but nevertheless, possible things that might continue to float our MBS market.
1) China will keep buying our mortgage backed securities. Why? We are using the opening ceremonies as leverage. They keep buying our junk bonds (that is what MBS's are right now) and we won't throw a stink fit about Tibet. You laugh at this? Don't doubt it for a minute.
2) Opec will be converting profits in to commercial CDO investment and MBS purchases. The threat of opening up ANWR and off shore drilling in the name of US national security has OPEC shaking in their boots.
3) The US is still a safer bet than most other places...flight to quality. (if they only knew the truth!)
Prep for a 7% par rate on the 30 year fixed, but don't think twice about flipping and ripping to another lender if rates improve over the 60 day price on deals further out.
Thanks Rich. Your comments are always well thought out. We'll see what happens. Take care.
Paul