7th
Mortgage Rates - Bad news for Mortgage Giant is Good News??
Interesting week so far. Mortgage Rates change every day based on the trading of mortgage bonds. Since Monday here are some things that have been newsworthy in tracking mortgage rate activity.
Kansas City Fed President Thomas Hoenig says that inflation is “becoming imbedded” in the economy, which is seen as very negative by the bond market. Remember - mortgage rates stay low, when conservative investors want to park a lot of money in a bond that they are only going to get paid 5% or 6% on for the next thirty years (in theory - most don’t expect the borrower to keep the loans for the full 30 years - but anyhow…).
So if inflation kicks in, its going to hurt the buying power of 5% or 6% interest I agreed to. I need to raise the rate I can accept to offset the inflation. So in general the more inflation present - the higher mortgage rates will be. In addition - normally the FED would raise short term interest rates to ward off inflation. It’s tough to imagine them doing that right now…
On a related topic -have you filled up your gas tank this week - ugh!
So then the other big news was about Fannie Mae. They are kind of the conduit for all of these mortgage bond buyers to go through to park their money in these good, quality, safe mortgages. Fannie Mae works with the lenders to set the standards that must be met to qualify for the good rates these bond buyers will accept. They reported a bigger than expected loss to the tune of 2.57 Billion dollars.
So the bad news for Fannie Mae is bad news for the economy, which is good news for mortgage rates in the short term. Usually bad economy means investors with money will move some money out of stocks and they usually move some of that money in to bonds, which helps keep rates low.
Keep ya posted!
Craig Garcia is a Managing Member of Bridge Capital Lending, LLC. A mortgage and investment firm offering Home Loans, Refinances, Purchase Loans, Commercial Loans and more. They also offer Investor Loans that use private lenders to fund Hard Money Loans. Craig can be reached at 877-8GO-GREEN or 954-217-9518.