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Market rally in the stock market pushing mortgage rates off their lows.
If and when we start to see a sustained rally in the stock market we will likely see a continued rise in interest rates. As more money moves from the safe haven of treasuries and mortgage backed securities to the high risk stock market, bond rates must rise to attract buyers. This is how it works, bonds need to have an audience , their audience cares about the returns they offer. The higher the yields the higher the return on the investment or (ROI). When the stock market is declining, bonds are able to offer lower yields to attract buyers, lower yields equals lower rates to consumers. When the stock market is gaining, yields on bonds start to rise to attract buyers away from the increasing returns of the stock market. In the mortgage industry we see this positive news as negative for low rates. Today we are still able to offer the lowest rates in recorded history. We can only guess what tomorrow’s rates will be, but we know for sure what they are today!

Interest rates in the 4% range are here. The funny thing is that they have been here since December 18th. With all the doom and gloom in the economy, the Federal reserve board knows it must keep borrowing cost down in order to stimulate the economy. The largest monthly bill in most households is the mortgage bill. So it makes a lot of sense to effectively raise incomes and spending by lowering that mortgage payment. Now how long can they do it is the question. We don’t know, no one really knows. What we do know is that there is actually a rate available today at 4.0% 30 year fixed! Remember, the lowest rates available in the market place are not free. These low rates come with up to 4 to 5 points in some cases. Is it worth it? Yes and no, if you positively know you will be staying in the home for years (5 or more) to come then yes. If you are not sure than ask your advisor for an option with lower points, this option will lower the points on the loan but in return your rate will be higher. The current market conditions are showing most loans with points. In the past we saw low rates with low fees, but now, with rates so much lower than previous years, lenders want the customer to essentially pre pay some interest (points) in almost all loans. Starting April 4th 2009 you will also start to see LLPA on more loans. LLPA = Loan Level Price Adjusters. These adjusters are set up by Fannie Mae and Freddie Mac to offset risk in the loan. So if your loan to value is high, there is an adjusters (points to the loan) Credit score not 740, Adjusters, cash out loan yes you got it adjusters. On April 4th they are lowering the threshold on these adjusters. Though rates might remain low for some time, LLPA adjusters are looking to offset the benefit. Bottom line, if you are in the market to purchase or refinance, no better time than today!