Mortgage rates skyrocket on Friday

Discussion in 'Economics' started by The Kin, Mar 8, 2008.

  1. From
    Product / Friday's avg / Last week's avg

    30 Year Fixed 6.09% 5.80%
    15 Year Fixed 5.49% 5.16%
    1 Year ARM 4.69% 4.59%
    30 Year Fixed Jumbo 7.04% 6.79%
    5/1 ARM 5.35% 4.94%
    3/1 ARM 5.19% 4.87%

    I don't have the numbers from Thursday, but I believe they were even more dramatic as mortgage rates had been falling, until last Friday. I wonder if it had anything to do about Citigroup "scaling back" mortgage operations on Thursday.

    I was under the impression that the fed wanted to quickly cut rates to ease the pain of ARMs reseting and to encourage others to refinance out of exotic mortgages and into traditional fixed rate products. If mortgage rates continue to rise, we may be in for some real trouble in the housing bubble. I honestly believed the worst had passed.
  2. balda


    This is how market shows that fed is useless at this time. Further cuts will not help at all.
  3. The mortgage-backed-securities (MBS) in the secondary market TBA cheapened in the week ending March 7 to the level that was seen in 1998 LTCM scare. Mind you, these are prime mortgages issued by GSE such as Fannie Mae (FNM) and Freddie Mac (FRE)

    One reason for the free fall in the MBS prices is that neither the GSE ( FNM and FRE) nor banks will buy these mortgages. It is interesting as to who else will buy these MBS.
  4. More from Bankrate

    30-Year Fixed Jumbo

    Current: 7.04
    1 Month Ago: 6.66
    3 Months Ago: 6.68
    6 Months Ago: 6.97
    1 Year Ago: 5.99

  5. CStar


    Even Annaly Capital Management finally lost stock value recently and that company seemed to be almost immune to the current credit crunch. I agree that a Fed loosening policy is a huge mistake in this set of circumstances. The Fed is causing a Commodities Bubble with present policy, similar to the same stupid thing Greenspan did with lowering rates to create the Housing Bubble.

    Bernanke seems like a weak leader to me. Hopefully this next election will see him out of a job soon but I don't know if a Fed Chairman can be fired by the President. Anyway, his term will be up for re-appointment in 2010.

    My opinion is that rate cuts now will cause stagflation rather than fix this problem. This problem needs to shake itself out with the government helping to provide some security in the form of government backed loans for reasonable housing at a bit more than a reasonable 5% rate. There should be a cap on loan rates as well, to help deflate some of these ridicules 1,000,000+ 2-bedroom homes on the coast. Coastal properties will always be worth more but this 'Bubble' Greenspan caused has turned some real-estate markets into unreal-estate markets and that needs to change without the country going into a panic over it.

  6. who wants to refi since they have to requalify, which many cant.

    or who would want to lend on a house which is plumetting in value
  7. the long end is starting to get skittish

  8. Mortgage rates have nothing do with Fed rate cuts.

    This is long term debt instruments unlike home equity lines of credit, credit cards, and auto loans. However Fed rates cuts usually result in lower mortgage rates afte a spike.
  9. People: you need to understand that a mortage rate is a function of risk appetite, bond rate, and inflation. Inflation is soaring. Read this article and you will see what I mean about inflation:

  10. CStar


    In regard to inflation, yes we have more of it than the Federal Reserve will admit. The formula they use always strips out volatile food and energy costs but that form of inflation reporting needs some serious redefining. Food and energy prices have only been volatile in a one-way street, up!

    Wheat prices are going to rise until this ethanol issue is resolved. Too many farmers planting corn instead of wheat. Of course if oil keeps rising, the ethanol market becomes more of a solution than a problem buy only if oil continues to stay at an inflated price. In the long run, more alternative energy sources like ethanol could help regulate the price of oil but that would take a while. In the meantime, it is just contributing to commodity inflation and ultimately heading us towards a period of stagflation under the current credit crunch.

    I once heard that George W. Bush has an I.Q. of 150. I have to assume that test score is relative and that the test was conducted by Jane Goodall. He over-spent us in this joke of a war and caused someone to coin the phrase: "No Child Left a Dime." I'll be glad to see him go; only it will be eight years too late in my opinion. His tax cuts would have been helpful but no one does tax-cuts when there is a war on unless they are a moron.

    #10     Mar 9, 2008