Mortgage Rates Predictions

 

Can I make accurate Mortgage Rates Predictions?  On a day to day basis, the answer is yes.  Since I track movement in the FNMA Mortgage Backed Bond Market and every basis point the market moves correlates directly with the interest rate I am able to offer, I can confidently provide mortgage rates predictions.  When deciding whether to float or lock a loan, tracking trends in the Mortgage Bond market and paying constant attention to daily movements has saved my clients thousands of dollars. 

There is always a degree of speculation involved anytime someone does long term mortgage rates predictions.  That being said, I will speculate that we will at least have one more rally on long term fixed mortgages.  The last few months of economic reports and the real estate market disaster give me no confidence that the economy is healthy.  Later this week when the Retail Sales, CPI, and Consumer Sentiment reports are released I would expect to see even more proof that the economy is hurting. 

Unfortunately, there are a few more factors to be considered than just the Bond Market in today’s mortgage environment.  As I always say, “It’s all about RISK.”  Investors are not yet confident that Mortgage Backed Securities are as good of an investment as the previously were viewed.  In an effort to clean up the industry and encourage investors, credit requirements and loan level price adjustments [penalties that increase the mortgage rates based on credit scores or other layers of risk] have become exorbitant.  This is still stalling the real estate market because the number of people that used to be able to qualify for mortgages has been cut in half.  If your mortgage has any layers of risk to it, I would lock in on at least a 3 year arm while you can.  The mortgage products like 100% financing, stated income, jumbo mortgages, second mortgages, and high LTV investment properties have been disappearing daily.  Lenders have also cracked down on seasoning on title, appraisal seasoning, and loans in declining markets.  Until this flight to quality is completed and the real estate market has life breathed back to it, I think we are in for more volatile hard times. 

On the brighter side, the FED did basically upgrade Mortgage Backed Securities today.  This should encourage foreign investors to put their money in Mortgage Backed Securities as a safe haven.  I would love it if this was the spark that drives long term fixed rates back down to the low 5’s again.