Florida Mortgage Rates – Evening Report

by Florida's #1 Mortgage Planner on December 16, 2008

Locking Stance: LOCKING    Mortgage Bonds: +131bp

You just have to love it when a plan comes together and floating up to this point has been a great ride.  Mortgage rates have been falling and today was a huge move after the Fed made the statement they would keep buying up mortgage backed securities, and that came after Pimco announced it would do the same (working together maybe?).

While mortgage bonds had a great move higher today, they didn’t really have time to correct themselves.  They did break through two resistance levels, but those levels may very well pull mortgage bonds lower, bringing them back below those levels, which could be very likely since they are at about the 50% retracement level on just today’s move.

Here are some of the reasons the Fed gave in their Policy Statement as they justified the drop to 0 – 0.25% on the Fed Funds Rate…

Overall, the outlook for economic activity has weakened further. (I agree with this statement)

Meanwhile, inflationary pressures have diminished appreciably.  In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters. (I disagree that inflation will moderate further, in fact I feel it will grow out of control as a result)

The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.  In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time. (This is a very scary thought – they have obviously fallen off their rocker with this one)

As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.  The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.  Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses.  The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity. (This statement is what sent mortgage rates lower today and will aid significantly in creating the “mortgage rate bubble”.  You can expect more announcements of bailouts and more wasted taxpayer money on efforts that will prove futile long term)

So what does this all mean for Florida Mortgage Rates? Mortgage rates dropped today and, with the government’s incessant drive to buy up more MBS in their efforts to drive mortgage rates down, we may see even lower mortgage rates ahead.  However, demand will likely weaken soon and lenders/investors will be pricing premiums into the offers to consumers as hedges to protect themselves from the potential collapse in the markets after loans are locked.  Therefore, in all likelihood, we are seeing the lowest mortgage rates for a while, maybe forever.

{ 2 comments… read them below or add one }

Dallas Mortgage December 16, 2008 at 5:57 pm

Not all lenders have given up all of the gains.
I am still floating.

Beth Forbes December 16, 2008 at 6:59 pm

“However, demand will likely weaken soon and lenders/investors will be pricing premiums into the offers to consumers as hedges to protect themselves from the potential collapse in the markets after loans are locked. Therefore, in all likelihood, we are seeing the lowest mortgage rates for a while, maybe forever”

That’s the best advice I’ve seen in a while. You may hear lower rates being talked about but there will be a floor and this may very well be it. It’s time to stop fence sitting and start locking.

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