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Providing
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 Here are the rest of the last week's comments....... Greenspan worries about "exotic" mortgage instruments..... September 26 Higher Mortgage Rates on China Decision..... September 23 Which has more force, Mother Nature or the Fed?..... September 22 FOMC ups rates to 3.75%, says Katrina could fuel inflation ..... September 20 The Week in Review..... September 18 |
Hold on to your Hats, rates will be going up..... October 3 11:36 AM EST This morning's release of what was expected to be a lightly taken report showed that Businesses across the board are expecting price increases due to Hurricane Katrina. The ISM report is a survey of business managers from across the country as to she state of current orders, production, pricing and the general state of their business conditions. Economists expected this report to show about a 52 on the scale, showing only a slight expansion in September (Readings over 50 show growth), but today's report shows a 59 reading meaning that there is considerable growth. Responses from many of the business managers surveyed stated that supplies have been slow moving and more expensive to get to the factorise and therefore that cost will be passed on in the form of higher prices. Well, I think we all saw that coming just from the higher prices we are paying at the gas pump, but this news seemed to take the market by surprise and higher mortgage rates are on the way. It is almost as if the investor's were waiting for someone to tell them instead of being pro-active. Still, the end result is a bond market on the verge of crossing the 4.4% mark which will signal not only rates for a 30 year fixed above 6%, but also signals that those rates will be here to stay and could very well go quite a bit higher. I personally would not be surprised to be writing about 6.5% rates in this column before the end of the year. Traditionally, rates go higher in the months of October and November, but this news just adds fuel to the fire. So, hang on to your hats, get a rate locked in and watch for higher rates. On another note that I have written about in the past few months was the posting of 5 year ARM's at the exact same rate as a 30 year fixed on Friday with a 3 year ARM just 1/8% lower that a 30 year. Perhaps this news will increase that spread, but if you are considering an ARM right now, take a careful look at the savings and your situation before writing off a fixed rate loan. Have a great day.......... Updated Forecasts This continuing trend of higher and higher rates has caused me to change the rate lock advisory to lock for all four stages. In addition, I have updated my forecast to show rising rates for the second half of 2005. This is a combination of what we have seen in both the market and the economic reports over the last 3 months and the continued tendencies of the market to shoot higher of very little good news. Now, on the bright side, the global economy is still going nowhere. We have quite a quandary where if the market does not rise in response to continued increases by the Fed we could see an inverted rate curve due to the global pressures. This is still a very good possibility and should we see anything close to an inversion, rates could drop quickly. The very high number of mortgages that are ARM's vs Fixed rates would switch in a heartbeat if you can get a 30 year fixed at a lower rate than a 5 year ARM!! If this fine line were to get crossed, you can throw all the forecasts of higher rates right out the window. Stay tuned! See you tomorrow! Where are rates headed in the next 3 months? It looks like the trend will be heading steady or higher with new projections out and the higher oil prices and Fed rate increases driving rates over the next 3 months The September Fed Meeting You can read the Fed's statement on the Board of Governor's Federal Reserve website for yourself. For the 11th straight time, the Fed has increased the Federal funds rate, citing inflationary pressures from energy prices as the reasoning in raising rates one more time. The Fed did make a point of stating that in the long term, inflation was under control. Where are rates going this year? The entire first part of the year, I have been sticking with the experts position that for the year of 2005, we can expect to see mortgage rates to level out in the 6.5% to 6.75% range for a 30 year fixed rate mortgage by the end of the year. Although this forecast has been the same for the last 3 years and has yet to materialize, this long term forecast must be still taken into account. My personal expectations are that 30 year rates will be rising for the second half of 2005 barring any more terrorist attacks. If I were financing/refinancing a home . . . . I would Lock if my closing was within 10 days I would Lock if my closing was 11- 30 days away I would Lock if my closing was 31 - 45 days away I would Lock if my closing was more than 45 days away *As always, this commentary is only my personal opinion if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any/all other borrowers.
DailyInterest.com
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