Posts Tagged ‘ Tumwater Mortgage Lender ’

Don’t look now but oil prices are climbing.

This should worry today’s home buyers and would-be refinancers because some of the same forces that helped to push crude past $50 for the first time in 4 months also cause mortgage rates to rise.

March 18, the Federal Reserve committed an additional $1.15 trillion to support the economy.

Since the announcement, investors have questioned whether the Fed is purposefully spurring inflation. The Fed’s total debt purchases now total $1.75 trillion.

And to finance its purchases, the Federal Reserve is printing new money, devaluing the U.S. dollar along the way. This then leads to inflation which, all things equal, causes oil prices to rise, gas prices to rise, and mortgage rates to go with them.

As we’ve seen the last few summers, oil prices and mortgages seem to touch their yearly high points while the weather is warmest.

Mortgage markets scored big gains last week, sparked by the Federal Reserve’s pledge to buy $750 billion more mortgage-backed bonds in 2009.

Conforming mortgage rates fell on the week, overall.

But Federal Reserve intervention wasn’t the only good news for rate shoppers last week. New evidence showed — for the time being, at least — that the U.S. economy may be reversing direction:

• Homebuilders are breaking ground on new homes again
• First-time jobless claims are falling
• Inflation is present and, therefore, deflation is not

Should the economy continue trend stronger through the summer, it will likely fuel stock market gains, drawing cash away from mortgage bonds. This would lead mortgage rates higher — perhaps for good.

Today’s levels are artificially low, after all, supported by government intervention more than economic fundamentals. After the Fed’s Wednesday afternoon announcement, rates fell to all-time lows before recovering sharply into the weekend on economic optimism and fears of inflation.

This week, the trend higher may continue.

In addition to the economic data set to be released this week, the U.S. government is expected to unveil its “toxic asset” plan Monday. If the plan includes issuance of new federal debt, inflation concerns will grow and that should lead mortgage rates up once more.

Some of the week’s key events include Monday’s Existing Home Sales report, Wednesday’s New Home Sales report and Friday’s consumer spending report, as well as President Obama’s Tuesday evening address to the nation.

Rates can make huge changes from day-to-day and even from hour-to-hour. If you’re shopping for a new home loan and find a mortgage offer that “fits”, consider locking it right away. With so much news hitting the wires this week, the rate quote is likely to expire quickly.

For the fifth time in a year, rate shoppers learned an important lesson this week: When mortgage rates plummet unexpectedly, they often recover just as fast.

Wednesday, the Federal Reserve’s newest $750 billion mortgage market pledge helped to push conforming mortgage rates near their lowest levels since WWII.

24 hours later, however, those rates were expired.

After considering the long-term implications of the Federal Reserve — literally — printing new money to service the recession, markets grew fearful that the Fed’s interventions will eventually lead to inflation. Inflation, of course, is the enemy of mortgage rates.

So, if you’re looking for the explanation of why rates rose as suddenly Thursday as they fell the day prior, this is it. And, in hindsight, rate shoppers might have seen it coming, if only because we’ve seen the exact pattern 4 other times:

1. After the Fed’s “surprise” rate cut in January 2008
2. After the Fannie Mae and Freddie Mac takeovers in September 2008
3. After the Fed announced its first $500 in support in November 2008
4. After the Fed zeroed out the Fed Funds Rate in December 2008

Sharp drops in mortgage rate, it seems, are followed by immediate bounce-backs.

Unfortunately, not every would-be refinancing homeowner saw the increase coming. People that locked Wednesday captured the lowest rates in 6 decades. Everyone else wishes they had.

From day-to-day, we don’t know if mortgage rates will rise or fall. Nobody knows that. But, we do know that mortgage rates tend to follow patterns and we’ve seen the above pattern 5 times now.

When mortgage rates plunge like they did Wednesday, they rarely low for long. When you find a rate you like, get in and get locked as soon as possible. By tomorrow, it’s likely to be gone.

The Federal Open Market Committee begins a scheduled, 2-day meeting today to discuss the country’s monetary policy. As is custom, the group will issue a press release to the markets upon adjournment.

There are 8 scheduled FOMC get-togethers annually and the post-meeting press releases are among the most powerful market-moving events of the year.

It’s not the Fed’s actual policy changes that causes fortunes to be won or lost, though.

These changes can predicted and traded — and, therefore, hedged — on Wall Street using Fed Funds Rate Futures. For example, Wall Street predicts with 97% certainty that the Federal Reserve will not make a policy change at this time.

As opposed to than policy change, it’s the verbiage of the FOMC’s press release that can really move markets. This is because the press release is a clear-eyed look into what the Federal Reserve thinks of the United States economy — its strengths, its weaknesses, and its threats.

After its January 2009 meeting, the FOMC’s press release said:

• The economy has weakened further
• Employment has declined steeply
• A gradual recovery may come later in 2009

Since that meeting, though, a number of high-profile economists, including Fed Chairman Ben Bernanke, have said the likelihood of economic recovery increased for late-2009.

This is why tomorrow’s FOMC press release is so important. It will contain clues about the Federal Reserve’s next steps and current psyche. Undoubtedly, it will make a significant impact on the mortgage markets.

In general, when the Fed alludes to inflation and stronger growth, mortgage rates rise. Talk of a recovering economy and rising oil prices in tomorrow’s press release, therefore, would likely raise rates from their current low levels towards levels not seen for 6 months.

In the end, it’s what the Fed says that matters more than what the Fed does. The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.

Mortgage markets lost a little bit of ground last week, edging mortgage rates higher in a week marked by the largest stock market gains since November.

Once again, mortgage rates couldn’t sustain a rally of more than 5 days. Not since late-2008 have mortgage rates managed to fall two weeks in a row.

Last week’s market was impacted by three distinct factors:

1. Bank balance sheets weren’t as bad as feared
2. Discussion started on new bank valuation methods
3. Traders got optimistic that “the worst is over”

The rally will likely continue into this week, too. This after the 60 Minutes interview with Ben Bernanke in which the Fed Chief said he won’t let big banks fail and that the recovery will likely begin later this year.

It’s the first interview with a sitting Federal Reserve Chairman in history.

Coincidentally, the Federal Reserve will be in the spotlight this week as it concludes a two-day meeting Wednesday after which the Fed will issue its standard, post-meeting press release at 2:15 P.M. Although it’s not expected to make Fed Funds Rate changes, the markets will closely watch the Fed’s language for clues about the next phase of monetary policy.

In general, when the Fed indicates that inflationary pressures may build, mortgage rates rise. Moreover, in the above interview, Bernanke alluded to such inflation and the need to control it in the future.

Despite the small rise in rates last week, mortgage rates remain low and favorable for high-credit scoring borrowers. Volatility is still a factor, however, so if you’re nervous about rates rising, it may be best to lock early in the week — before the Fed’s Wednesday announcement.

Mortgage markets improved last week with investors’ renewed aversion to risk. To the benefit of home buyers, as major stock indices touch 12-year lows, investors are moving investible cash to the bond market.

For only second time this year, mortgage rates ended the week lower than where they opened.

Some of the bigger stories that caused mortgage rates to fall last week included:

• Unemployment reaching 8.1 percent nationwide
• The Fed reducing its economic outlook for 2009
• Investor concerns for blue chip General Electric

In addition, US Bank and Wells Fargo cut dividends by roughly 85 percent each. Both banks are considered well-run and positioned their respective cuts as a way to bolster balance sheets. Markets took it as a negative instead.

This week, there isn’t much economic news upon which to trade, save for Thursday Retail Sales data. Therefore, markets will look for other clues about the future of the U.S. economy.

Tuesday, Fed Chairman Ben Bernanke has a scheduled speech on financial reform and then Thursday Congress takes up mark-to-market accounting. It sounds like a dry topic, but mark-to-market is the accounting rule that makes banks take losses on assets they’ve yet to sell.

Some experts think mark-to-market accounting makes the financial system appear weaker than it is so this is why Congress is starting a debate.

If mark-to-market rules are loosened, it would likely spell good news for the stock market and bad news for mortgage rates. In effect, money would flow in the opposite direction as it did last week.

For now, though, mortgage rates are low. If you’re currently floating a mortgage rate with your lender, consider locking in. If there’s even a whisper that mark-to-market accounting rules will change near-term, mortgage rates should rise.