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Bruce McCoy
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The yield on the 10 year T-Bill plunged below 4% today ending the day with a yield of 3.93%. Mortgages didn't move much from yesterday's level, but I expect them to follow in the next few days.
Again, rates look like they want to move lower and, if you missed out last spring, get your application in NOW!
Interest rates go up like a rocket and drift down like a parachute. At least the rocket has stopped going up and fixed mortgage rates ARE drifting lower. In the last week we have seen them drop from a little over 6% for no points down to 5.75% today.
The bottom line? If you are thinking about refinancing and have been waiting for rates to come back down from the late summer run-up, then get your application in NOW! The people who got the lowest rates in June had started their applications in May and April. Remember, you can lock the rates now or hope the "parachute" keeps floating down.
Your Credit Report
There are 3 main national credit reporting agencies in the U.S. (Experian, TransUnion and Equifax) that gather payment histories, amounts, late payments, high balances, etc. and provide this information to authorized clients. Contrary to the popular belief that these agencies provide ratings on the individual accounts of borrowers, they report only what is being reported to them. In other words, if Sears or MasterCard tells Equifax that you were a month late in paying them then that is what is reported to anyone that requests your credit information.
Occasionally the bureaus themselves will cross one borrower's file with another; but that is a rare occurrence in my 25 years of relying on them. The biggest error is the merchant, Sears, MasterCard, etc, has misreported the account to the bureaus. This misreporting causes the credit agency to recalculate your credit score (commonly known as a FICO score) lower, which then effects interest rates you receive on new loans and (READ THIS!) even existing loans such as credit cards! Unfortunately you usually don't discover the error until well after the fact, then it is time consuming (figure at least 30 days and not unusual to be 90 days or more) to get the error corrected. If you are trying to buy a home with a 30 or 45 day escrow you may not get the loan, or the home.
Due to complaints from many consumer groups (not the least of which has been the National Association of Mortgage Brokers) this is finally being addressed. Let's face it: if a mortgage broker can't get you a loan he or she doesn't get paid! It is very self-serving. There is a bill going through Congress that requires that when any merchant reports any derogatory information about your credit to any credit agency, then they must notify you immediately. In addition, all three credit agencies must provide you a copy of your report free of charge at least annually. There are other provisions in the bill, but these are two of the most important. This may not solve the glacial slowness and frustration of dealing with the bureaus, but at least you will have a head start before it becomes a crisis.
Interest rates for conforming loans (under $322,700) for 0 points as of 9/22/03 (a.m.) are:
30 year fixed: 5.875% (APR 5.96%)monthly payments are $1,908.89/mo.
15 year fixed: 5.52% (APR 5.52%) monthly payments are $2,615.37/mo.
The market rallied sharply yesterday and 30 year fixed conforming (under $322,700 in California) dropped to 5.875% with 0 points and a 30 day lock-in period. It does appear that the rates would like to go lower in the near term. If you missed out on the lower rates earlier, get your loan application into your lender now. If the rates continue to come down, then the borrowers that get the low rate are the ones that are already in the process.
On the other hand, I didn't think that we would see under 6% again just a week ago, so you pays your money & takes your chances!
Fixed mortgage rates improved by an eighth today, if this continues we will see "no point" loans under 6% by the middle of next week. It looks like the main reason for today's fall was a combination of the 5 & 10 year treasury auction going well earlier this week and the sharp fall in consumer confidence today.
"Consumer Confidence" means how secure people such as you and I are on our personal economic outlook. Like whether or not we will have an income to pay Mr. Visa. A falling number means fewer people have that confidence.
Wish me luck for this weekend- I'm a 30+ handicapper trying to win a 2 weekend golf tournament! ( the 19th hole is where I'm always at par!)
Rates came out with a slight improvement from yestreday's sell-off, but worsened mid-day with an end of day rally (I love this business!) to finish slightly better than yesterday. The main reason for the see-saw day is the light volume (individual trades will more effect the market and prices). Why is the volume so light? The US Treasury is auctioning off 5 year and 10 year notes on Wednesday and Thursday. The government is now going to monthly rather than quarterly auctions in order to raise the enough money to fund the deficit.
We will probably see a soft market for a few days until the auctions are over.
BUT!, as I have said before, if I knew for certain (or was right more than 50% of the time) I would be on a new boat in the Carribean!
The un-employment report for August was released this morning, and the numbers weren't good. The forecasters were looking for a creation of a few thousand jobs. What they got was a loss of almost 100,000 jobs.
What this job loss shows is that although other economic numbers are indicating a strengthening economy, jobs aren't being created- or even maintained! If jobs aren't created (there have been over 500,000 jobs lost since the 1st of the year) then the fewer consumers will be able to afford what ever goods and sevices are available. Eventually, since the consumer is what has been driving the economy for the last couple of years, our national economy will slide back into recession.
I've said all that to say all this!
Without the strength of new jobs, interest rates must stay low. It is only one of only a few tools that the gov't has to change the course of the economy.
Rates this a.m. are down by about an eigth in rate from yesterday.
“No downpayment” loans have been around for a number of years. However, they have often been ignored because in a Sellers’ Market, most sellers (and their real estate agents) have sought purchase offers from prospective buyers who were willing to make a large downpayment. The logic behind their thinking is that the larger the downpayment, the easier it is for the buyer to get loan approval. Easier loan approval means an easier sale. The market has been changing over the last few months from a sellers’ market (where buyers must stand in line to make an “over asking price” offer) to a buyers’ market (buyers offer less than asking price and other concessions from the seller). So now, in today’s market, sellers are more willing to listen to an offer where there is no downpayment involved.
(Note to Sellers: sometimes the financing that a seller is willing to explore will sell the home when there are many competing properties on the market).
Why would a lender be willing to make a loan where the buyer/borrower has nothing down? Lenders believe in the value of California real estate, so they believe the value of the security is safe; and, for no down paymnet, they can charge a higher interest rate. The lender also believes that this may be the only opportunity the buyer has to own a home and the buyer will realize this and not default on the mortgage.
If you’re a buyer and would like to explore all of your options, or you’re a seller and you would like some suggestions on how financing concessions may help sell your home, please give me a call. I’d love to help.
Fixed interest rates for mortgages under $322,700 as of 9/04/01 (p.m.) are:
(for “no point” loans)
30 year fixed 6.375% (APR 6.471%) payments are $2,013.23/mo.
15 year fixed 5.5% (APR 5.655%) payments are $2,636.28/mo.
I always tell my clients, that if you want to know where mortgage rates are heading, follow the yield on the 10-year T bond.
When the price of the 10-year T bond falls, its yield rises, and when yields on the 10-year T bond rise, mortgage rates generally also rise. It isn't a hard and fast rule, but it will give you an general idea.
To follow the T-bond yield, check Yahoo's Composite Bond Rates service.
August is generally a pretty quiet month in the bond market. Traditionally bond traders take the month of August off for vacation and not much happens, even with some "less than stellar" economic news. However, the traders are back and the bond market is seeing some weakness (as bond prices go down interest rates go up & vice versa). Yields on the 10 year t-bond are up to a resistance level around 4.57%. It appears that if the yield breaks thru 4.6% it will probably go to 5%.
The key economic report this week is the unemployment report due on Friday.
Rates are still pretty flat from the 25th, looks like about an eighth better in rate for a 30 day lock today.