The Fed lowered the Fed Funds Rate by 0.500% to 3.000% yesterday. The move was widely anticipated and so Wall Street’s reaction was muted.
Because it is tied to the Fed Funds Rate, Prime Rate also fell by 0.500% yesterday. Holders of home equity lines of credit and credit card debt benefited from the [...]
When the Federal Open Market Committee adjourns from its two-day meeting today, it is widely expected to lower the Fed Funds Rate.
This does not mean that mortgage rates will fall.
In fact, using history as an indicator, we should expect mortgage rates to rise if the Fed Funds Rate falls.
Remember: The Fed Funds Rate [...]
If you only read headlines this past week, you may have missed two very important points.
The first story relates to Housing Starts. Housing Starts measure the number of new homes entering the construction phase. The headline blared “Housing starts plunge to 16-year low“.
If you are a homeowner, this is terrific news.
Because [...]
Mortgage rates change from day-to-day, but last week’s volatility was a record-breaker.
After drooping through Tuesday and then skyrocketing Wednesday and Thursday, mortgage rates retreated slightly on Friday.
By weeks’ end, rates were at their same levels from mid-December.
This is in contrast to Tuesday, just after the Fed’s rate cut and before the [...]
(Pronounced: NEGH-ah-tive am-ohr-tih-ZAY-shun)
Negative amortization is the process by which a loan’s principal balance increases on a month-over-month basis.
This is in contrast to a “typical” amortization schedule in which the principal balance decreases.
Negative amortization is an optional feature on some home loans.
These mortgages are usually referred to by the brand names “Option [...]
The Dow Jones Industrial Average surged 631.86 points in the last three hours of trading yesterday as traders piled into equities.
Fueling the rally? The bond market.
For as much as stocks gained today, bonds lost. Including mortgage bonds. The dramatic sell-off created a huge swing in mortgage rates and erased nearly [...]
When the Federal Reserve lowered the Fed Funds Rate by 0.75% yesterday, it was in response to economic weakness that mounted since its last meeting December 11, 2007.
By contrast, the mortgage markets meet every day.
Because of this, mortgage rates had already “priced in” the weakness to which the Fed was reacting.
This [...]
As promised, last week was heavy on data and on drama. And mortgage rates continued their slide lower.
This week, by contrast, is devoid of data and markets are already digesting the Federal Reserve’s surprise 0.750% rate cut this morning.
Mortgage rates are falling in response, but not because of what the [...]
Overall, mortgage rates are at their lowest levels since late-2005.
Despite rates falling, however, not everyone can take advantage.
This is because mortgage lenders started to tighten the guidelines of what they will lend and to whom, also beginning in late-2005.
In other words, the chart at right doesn’t apply to all homeowners equally.
If you are new in [...]
It’s a point that’s always worth repeating:
Ben Bernanke and the Federal Reserve do not control mortgage rates
This is particularly relevant today as newspapers, television programs, and market pundits posit that the U.S. is in the midst of a recession.
The latest evidence supporting that assertion is that Retail Sales grew at its slowest pace since 2002 [...]