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Mortgage Rates Have Worst Week In History

Orange County, CA – This week’s Fed statement led to a world wide market sell off and the worst week in history for mortgage rates. In a statement released on Wednesday, the Federal Reserve said its goal is to slow down the so-called ‘QE3’ security-purchasing program slowly, aiming for a stopping point sometime in the middle of next year. In the meantime, it said, the federal funds rate would continue to be targeted for between 0% and .25%.

The Fed noted that economic activity is “moderate” in it’s expansion due to a combination of improved labor markets, increases in household and business-level spending, and a dramatically improving housing market.  Though it’s being held back by fiscal policy, and only if “appropriate policy accommodation” is made will the economy truly be allowed to improve. As such, the FOMC is continuing their current pace of purchasing mortgage-backed securities to the tune of $40 billion per month, and Treasury securities at $45 billion per month.

Federal Reserve Chairman Ben Bernanke said that the $85 billion in monthly purchases could begin to be scaled back later this year given that the economic improvements continue apace. “Measured steps” was the term he used to describe the reductions, likening the process to “letting up on the gas” rather than “applying the brakes”.

The 0% to 0.25% target for the federal funds rate “will remain appropriate for a considerable time,” Ben Bernanke said. Assuming inflation remains under control, the FMOC expects to keep rates at this level until we achieve a 6.5% or lower unemployment rate.

Seems innocuous enough, right? The mortgage market didn’t think so. With Bernanke’s speech about “letting up on the gas” hitting the airwaves, the mortgage-backed securities market plunged more over two days than it has since “Black Wednesday” way back in 1992. This has, in turn, caused mortgage rates to be more volatile and significantly higher than they have been in years. ‘Best-execution’ rates hit a jawdropping 4.625% in the past few days according to Mortgage News Daily.

The last time Ben Bernanke released a statement was May 1st. At that point, the 10 Yr. Treasury was at a low 1.66%. Since that release and this weeks release the change has been dramatic. On Friday, the 10 year Treasury closed at 2.51%. That’s a 51% increase in 7 weeks! Follow the daily movement in the chart below or here.

Rapid Change in Mortgage Rates

Rapid Change in Mortgage Rates

Mortgage rates show no sign of stabilizing — but more importantly, they show no sign of coming back down in the near term. If you’re ‘shopping around’ for a loan today, you may very well come back to a lender you just talked to a few days ago and find that the deal they just offered you is off the table. The new mortgage rate on the table is likely half a percent or more higher than it was on Tuesday! Every day that you don’t lock in your rate, you’re losing more money, because the best mortgage rate today is going to be a fond memory by tomorrow.

No one knows how long this craziness will last, but one thing is absolutely assured: no matter what the Fed does, short of another stock market crash or similar economic disaster, the record-low rates of a month ago aren’t coming back.nd at the moment, every day you wait is going to equate to thousands more dollars you’re going to end up paying in the long run. Factor in the 15.4% increase in home prices  over the past 12 months and it tells us that purchasing power is at it’s peak today…right now. The longer you wait the more that slips off the table. Lock it in!!

If you need help getting quoted and locked quickly, contact us. We’ll get you immediate assistance.

Scott Storace

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