By Reggie Green, Team Green at Fairway Independent Mortgage Corporation. 480-704-4890 , email@example.com
Author: MORTGAGE NEWS
Experienced Mortgage Loan Officer / Team Manager. A part of the mortgage industry since 2004 in every facet - sales, leadership, management, etc.
My objective is to provide a great mortgage product to my client with great customer service and a timely closing.
Mortgage rates have dropped close to .5% over the past week.
Some of this improvement was given back Monday afternoon and so far Tuesday morning.
To say this market is volatile is an understatement.
Below are average interest rates across America as of 3/13.
The news of the Silicon Valley Bank Failure shook financial markets and had many investors fleeing toward the safety of bonds, which helps interest rates improve.
Ironically, the major component of the Silicon Valley Bank failure was their investment in bonds.
Silicon Valley Bank purchased bonds when interest rates were much cheaper.
When rates moved higher, their bonds were not worth as much as there are higher yield bonds available today.
If they have to sell, they would need to sell at a discount and lose money on their investment.
As depositors started pulling money out of the bank, the bank is forced to raise capital to meet this demand.
Large investments would have to be sold at a loss, thus causing the bank to become insolvent.
With the news of multiple other bank failures, I’m left to wonder if the FED has moved too far too fast?
Actually I’m not wondering, I firmly believe the FED’s actions have been too drastic.
Banks only have to hold onto 10% of their deposits and they invest the other 90%.
Banks that invested in bonds will have difficulty selling due to the much higher rate levels today then when many of these bonds were purchased.
This could put them in a liquidity crisis should depositors take their money out of the bank.
I also strongly believe the labor markets are much worse than the jobs reports make them out to be.
A large amount of companies have had large layoffs or hiring freezes, yet the jobs numbers are good?
While people are out of work or working less hours, we have higher interest rates on short term loans, car loans, HELOCS, etc. due to the FED rate hike.
Less and less people are going to be able purchase goods and services thus hurting the economy more.
The FEDs actions have worked, but it takes time for those results to show in the numbers they monitor.
It’s my opinion that the FED is pushing rates higher too fast putting a lot of other areas in the economy at risk.
The Consumer Price Index which measured inflation was just released and came in where experts predicted.
8:39 AM : The Consumer Price Index (CPI), which measures inflation on the consumer level, was reported at 0.4% for the month, and decreased by 0.4% to 6% year over year, in line with expectations.
The Core CPI Rate, which strips out food and energy prices, increased by 0.1% for February, which was above the 0.4% estimate, and decreased by 0.1% to 5.5% year over year, also in line with expectations.
Next week is FED week where they will announce if they will raise rates and by how much.
Mortgage interest rates hit 4 month lows after the Consumer Price Index Inflation Report on Thursday, January 12th.
They have since moved up some, but are about .1% lower than the week before.
December’s inflation numbers fell in line with estimates and show that inflation is coming back down to earth.
Year over year inflation dropped from 7.1% to 6.5%.
As inflation goes down, interest rates should follow.
Many experts are currently giving a LOCK recommendation as the Mortgage Backed Security Market has a level of resistance on the 200 day moving average that may be difficult to surpass. This means that rates have a higher likelihood of going up some verses going down in the short term.
We are also seeing an inverted yield curve when comparing the 10 year treasury and 3 month treasury.
This data typically signals a recession, which usually results in a drop in the stock market and improvement in interest rates.
I still expect interest rates to come down in 2023, but it won’t be a linear process.
More down than up days over a period of time = gradual rate improvement.