Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on November 25, 2008

Locking Stance:  CAUTIOUSLY FLOATING   Mortgage Bonds: +122bp

Yes, you saw that correctly, mortgage bonds are finally in a full blown rally mode at the moment, so it is time to take advantage of it.  The reason we had a rocket launch this morning is that the Fed announced it will purchase direct obligations of housing-related government-sponsored enterprises, which includes Fannie Mae and Freddie Mac and Federal Home Loan Banks.  The Feds also stated they would buy up mortgage backed securities backed by Fannie Mae, Freddie Mac and Ginnie Mae.  Needless to say, if the government is going to buy up MBS, the price will jump, but caution needs to be heeded until will see if there are any buyers left after the government is done.

GDP came in inline with expectations, as did the Chain Deflator, so nothing to sway mortgage bonds either direction.  Remember that just yesterday I was talking about how news can blow through technical barriers, in fact, they would be needed if mortgage bonds were going to breakout higher and send Florida Mortgage Rates lower.  Well, today they received that needed news from the Fed and have pierced above their downward trend line and now we have hope for lower mortgage rates.

There are reasons for caution still, though not for long term mortgage rate trends.  With a big move, there is usually a retracement, so be ready to lock in those gains, especially if you are approaching your closing date.  Also, we must wait to see if the Fed is the only one “buying” mortgage backed securities and that will take time to play out.  Many traders will jump in the game and ride the “Fed wave” to profits, then get it and leave nobody but the Fed left to purchase, and that will pressure bonds back down.

So, for now, ride the wave and let’s float for a bit.

{ 1 comment… read it below or add one }

Jason November 25, 2008 at 2:45 pm

With the Treasury Secretary on his spending spree he surely isn’t trying to get a good return on the tax payers’ investment. The bailout was to buy up bad mortgage debt but it never did. What is the purpose of the fund? Paulson’s has warrants on many banks and they average 1 – 3 percent when enacted. Yet the cash investment is about 20 percent of the market cap. Maybe the next Treasury Secretary will be less erratic.


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