By Betsy Gutierrez

Welcome to my first blog…..

One of the biggest questions I get every day, are the rates going to go any lower? No one really knows that answer since the bond market moves up and down all day just like the stock market. So what moves mortgage rates? Supply. Demand. Competition for money. Inflation. The Economy. Expectations. And you, of course.

Mortgage interest rates are based on Mortgage Backed Securities (Bonds). Bonds are affected by many economic forces that influence the demand for bonds. Each week the Fed releases various economic reports that affect bond movement. Foreign markets also can affect the bond market which in return will affect mortgage interest rates.

If the bonds sell high then mortgage interest rates go down. If bonds sell low then mortgage interest rates go up. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates to improve, while strong economic news normally has the opposite result.

There’s also a time-lag for mortgage pricing. Though shorter than in years past, it takes anywhere from several hours to several days for increase or decreases to get from capital markets to wholesalers to retailers to “the street” where loan originators are working with you.

Not all increases or decreases are passed along, either. Depending upon the size of the change, rates may stay the same (but fees, such as points, may change). Sometimes, a minor increase in bond yields in the morning is followed by a minor decrease in the afternoon, while mortgage rates remain the same all day.

Then, there’s the “unknown supply stream”, aka “volume”. Unlike many other investment opportunities, no one really knows how many mortgages will be originated, then made available for sale (as bonds) in a given period of time. Recently, a quick drop in interest rates produced a large buildup of loans to be sold to investors as homeowners rushed to refinance. This made way too much bond supply available in too short a time, and investors simply couldn’t absorb it all at once. Too much supply, not enough demand; prices had to go down, and yields had to go up to attract investors

The Bond market traded sharply lower last week coming close to some of the best price levels ever.

So when you ask the questions: Do you think the rates will go lower? Should I lock my rate in or wait? Rates go up faster then they come down so holding out for that 1/8 better rate to save a few dollars may cost you more in the long run if those rates go up overnight. When you ask, should I refinance? Rates are at an all time low, so if you have an interest rate that you can lower by a percent or more or an adjustable rate mortgage, now may be the time.