Question by xxxxxxxxx: Mortgage refi and fed rates?
Hi, I need to refinance my mortage. I have the paperwork in and our mortgage broker locked us in last week at 5 7/8. He is nuts for closing this deal (I think he is hurting because of the slow market). We never authorized the lock in, but he said rates had gone up since last week and we had 30 days for rates to change.
Can someone explain why rates are going up for a 25 year fixed mortgage if the fed is once again about to lower the prime rate? Are they not related? What moves the mortgage rate market. Thank you!
btw, my credit score is excellent and we are not getting a jumbo mortgage
Best answer:
Answer by jd
i dont beleive rates are going up. i also am in the middle of refinancing. my mortage broker also quoted 5 7/8. i have checked around and seems to be a solid rate for not buying it down. of course if you want to buy down then you may consider having somebody else broker the loan. good luck
What do you think? Answer below!
Rates have gone up, wait for a couple weeks and they will come back down. Usually when the Feds lower rates they take the money from the bond market thus increasing rates for a short period of time. Your broker sounds like he is doing a o.k. and is on the right track but should have notified you before the lock.
Tell him you want to wait for a few weeks / month before you re-fi. The rates should be down.
Licensed Realtor from Arizona
Mortgage rates and the Fed rate ARE NOT DIRECTLY RELATED…
The discount rate is the interest rate the Federal Reserve Banks charge depository institutions on overnight loans. It is an administered rate, set by the Federal Reserve Banks, rather than a market rate of interest. The primary conventional mortgage rate is a market-determined interest rate for long-term residential mortgage loans. A change in the short-term discount rate does not affect interest rates on long-term mortgages.
Historically, mortgage rates have followed the 10 Year Treasury, however, with the market being in such a frenzy, this has not been a good indicator either.
BE HAPPY WITH YOUR RATE!
As has been said many times, by many people, The Fed rate is NOT the prime rate, and it is NOT the mortgage rate and it does NOT directly affect the mortgage rate. Mortgage rates are a function of market trading of mortgage backed securities.
http://loan.yahoo.com/m/cq_det.html
http://www.bankrate.com/brm/green/mtg/basics3-6a.asp
Rates have risen over the past week (appx .5%), including a mid-day adjustment yesterday.
Also note, along with the familiar adjustments we are all familiar with (i.e. scores, loan amount, down payment, etc) rates are adjusted by individual lenders for internal calculated risk by geography. (example: rates in CA, FL, NY NM, etc. may not be the same)
It really boils down to where you live. Rates vary state to state. Also rates have gone up slightly over the past couple weeks. For example, with Citimortgage you could have gotten a 6% rate. But, as of yesterday, the rates would have been 6.25%. And as far as getting yield spread compensation, it sounds like your broker isn’t getting any at that rate. He actually did you a favor by locking you in at that rate, seeing as rates are higher right now. If he’s a broker he will be able to send your loan to a different bank. Although, i’m pretty sure you’ll find you’re going to pay a higher rate.
The fed rate, and mortgage rates are NOT two in the same. Also, people need to stop listening to the media about shady mortgage brokers. I’m not saying they don’t exsist, shady people are everywhere. Car sales, home improvement contractors, even Cell Phone salesmen. Ever hear the expression don’t believe everything you see T.V.? People need to stop being upset about someone making money. When you watch your favorite sports player, do you get mad at him when you buy the ticket to watch them play knowing he’s making millions? Or do you simply enjoy watching him play?
There are still honest people just trying to make an honest living like everyone else! It sounds like your broker is doing right by you.
Rates have increased some since last week.
Here is why you don’t understand it:
The FEDERAL RATE and MORTGAGE RATES are 100% UNRELATED.
Mortgage rates are not dropping like flies because mortgage companies have RECORD foreclosures that they are losing money on…and who do you think is going to pay for that?
New and existing borrowers on ARM’s.
You have to understand that the Fed rates are NOT dropping to stimulate the housing market…the Fed rate DIRECTLY affects the prime rate, and the prime rate is directly tied to ARM rates….that is to keep people from losing their homes in 4th quarter 2007 and 1st quarter 2008…and the mortgage companies are going to pass very litte, if any, of that savings onto the customers.
You have a good rate right now (assuming you are paying ZERO points)…be thankful for it.
He isn’t trying to scam you, he actually helped you.
EVERYONE is hurting in this market right now…including buyers…I have been losing buyers on average of 2 per month, because program changes have knocked them out of qualifying for a loan.
Yes, some rates are actually increasing, because lenders are tightening standards and demanding more interest as “risk profit.” If you have a 5 7/8 fixed rate lock, grab it now!!! You can always refi down the road if rates really do drop very much.
5.875 is not a bad rate. The bonds are fickle better today and worse tomorrow and that goes on day in day out without respect to what the Fed is doing.
Being in the business, when I have a borrower ready to commit to a transaction, I do not want to speculate further about what rates may do. If they get better, that is an anomaly. It usually goes the other way.
My finance professor put it best when he said that if you find a rate you like, you better take it because it may not be there tomorrow.
No one controls the market. Your broker was really just looking out for your best interests. Sure the bonds have reacted favorably to the Fed rate cut, but all we can hope for today is that we get back some of what we lost in the last week until something bigger (and unexpected in a good way) happens.