Posts Tagged Treasury Securities
Are mortgage rates going to go down to 4.5%?
Posted by admin in Uncategorized on June 9th, 2010
According to reports, the Treasury is considering a plan to reduce mortgage interest rates to 4.5%. No reports have come from the treasury directly so there are a few different scenarios that have been reported.
One of these says that the Treasury will purchase mortgage-backed securities (MBS) directly from Fannie Mae and Freddie Mac as well as mortgage backed by the FHA. By purchasing these MBS the Treasury will add liquidity to the mortgage market which will lower interest rates. The Federal Reserve (The Fed) announced a similar program last week which almost immediately lowered mortgage rates from over 6% to about 5.5%. The hope would be that this plan would increase liquidity in the market and increase demand across the economy for MBS, this lower the raising the price and lower the yield (Rate) on these MBS. The other scenario says that the Treasury will purchase mortgages directly from lenders as long as they have a rate of 4.5% on them.
Since there is no official statement from the Treasury there are no guarantees as to what, if anything, will be done. But, the markets have reacted positively to the fact that the Treasury, along with the Fed, are trying to improve environment for the mortgage and housing sectors.
I hear it would cost billions of dollars. And, I have heard that the government will make a profit. Which is true?
Since there is no actual policy these are all just guesses. If the Treasury offered mortgages at 4.5%, many people feel they will realize a profit since the Treasury can borrow funds at about 2.7%. This would give them a profit of 1.8% on this historically low rate. Other see this as a huge cost to the government to entice the lenders to offer mortgages at 4.5% when the market is currently 1% higher. Nobody can know for sure until there is an actual policy.
When can we expect these rates?
Many people feel that these rumors or “leaks” from the Treasury are an attempt to get a feel of how well or poorly a program like this would be received by the markets, Congress, the public, and the incoming Obama administration. While a lot of people think a program is in the works, the final look of that program is anyone’s guess right now.
I was going to refinance at 5.5%. Should I wait for these lower rates?
You know what they say about “a bird in the hand” . . . If a refinance at 5.5% make sense to you – do it. This program may never materialize. And, while you wait, you are not only spending more money with every payment you make, but rates would also rise to a point where refinancing is no longer a good option. There have been at least three opportunities in 2008 to refinance at rates below 6% and I have many customers that waited too long to make the decision. They have spent thousands more this year than they would have if they had refinanced. Many of them have already applied and locked their rate and are taking the sure bet. But, I still have a few customers that intend to wait for the 4.5% rate to materialize. All I can say to these customers is, “Good luck!”
The Advantages And Disadvantages Of Mortgages
Posted by admin in Uncategorized on April 28th, 2010
Lenders make money through interest, so if you pay off the principle of the loan early, you are avoiding paying the rest of the interest that would have compiled. When you have a fixed interest rate, you will likely be responsible for a penalty that covers a percentage of the interest you would have had left. Lenders base ARM rates on a variety of indices, the most common being rates on one-, three-, or five-year Treasury securities. Another common index is the national or regional average cost of funds to savings and loan associations.
Refinancing your existing mortgage means taking another loan to repay the first one. Now you may ask why will I need another loan to repay the first one and what’s the benefit of doing so? Refinancing your mortgage can help you reduce monthly payments. It will help you get lower interest rates.
Those of you not familiar with the latest mortgage amortization calculator resources now have at least a basic understanding. But there’s more to come.
Lenders give lock in periods for both rates and points. Lenders will accept as low as 5%, but the mortgage rate will be higher. A down payment of 20% or more will get the consumer the best home loans mortgage rate possible. Lenders come in several forms, from credit unions and banks to mortgage brokers. Mortgage originators introduce and market loans to consumers.
Bad credit home loans are often associated with high mortgage rates. The fact that you have bad credit makes mortgage lenders think that you are likely to default on your home loan. Bad prices promote bad behaviour. We as a nation are addicted to bad behaviour.
Banks want to see that you fulfil your commitments, so it’s better to pick up the phone and negotiate a “pennies on the dollar” settlement now, and get it behind you. Otherwise many lenders will require you to pay the full amount as a part of your closing conditions and will give you a higher interest rate as a result of your clear demonstration of defaulting on your debt.
Take time to consider the points presented on the advantages and disadvantages of mortgages above. What you learn about mortgage amortization calculator resources that may help you overcome your hesitation to take action.
