Interest Rates Still Low

Interest rates remained azbout the same this week, and remain near historical lows. With the volatility in the stock market expected to continue, the flight to safety and bonds is expected to continue, keeping interest rates down The following are some excerpts from this week’s newsletter on interest rates from HSH Associates :

“The brief rise in mortgage rates has leveled off, leaving us at about five week highs. The economic news out of late continues to feature a mixed-to-brighter picture, and that will make it difficult for rates to fall by any significant amount. There are also some new rumors that the Fed may embark on a grander plan to support mortgage markets, if needed, and there is a new push afoot to re-increase the conforming loan loan limits in high cost areas.

Will the Fed come back into the mortgage market in a larger way? Possibly. There is a continual drumbeat for someone to “do something” and the Fed has the available tools and capacity to do just that. The question is, how beneficial would this be? It’s one thing to jump into re-start a non-functioning market (as the Fed did in 2008), but the market is functioning at this point, and liquidity is not the issue today as it was back then. As far as interest rate effects go, it bears noting that the lowest interest rates to date have come after the expiry of the Fed’s QE1 and QE2 programs, as the perceived economic support from the Fed’s programs waned. To the extent that the Fed is back in the market, the economic climate is expected to be improved, and that can lift interest rates. To some degree, this is the situation today.

If the Fed wants to act as a backstop for a market which may not function, that’s one thing. However, if the Fed was to get back into the mortgage game in a larger way, we’d hope that it was only to foster a program for current but underwater homeowners to refinance (at least for a start). The banks aren’t much interested in doing so (and with good reasons) and there is no ready market for the mortgage paper such refinances will produce. While we’d still prefer our own Value Gap Refinance idea (developed over a year ago), the Fed’s intervention here might kickstart the economy, obviating the need for any new or novel approaches for monetary policy.

Mortgage interest rates are a part of the solution to what ails us, but it would be a stretch to say they have been the problem for some time now. Access to those low rates via underwriting roadblocks, add-ons, overlays and more are today’s more difficult issues, and lenders and investors are rightfully reluctant to expose themselves to more losses, future loan buybacks and other troubles.”

The following are interest rate quotes from Al Hermann of American/California Financial Services,

The following are interest rate quotes from Jan Schott Bank of America, Home Loans [email protected] 310-802-2300 :

Conforming Loans to $417,000

5 Yr Fixed: 2.625% @ .625pts 2.875% @ 0/pts

30 Yr Fixed: 4.125% @ .750/pts 4.375% @ 0/pts

Conforming High Balance to $625,500

5 Yr Fixed: 2.750% @ .750/pts 3.125% @ 0/pts*

30 Yr Fixed: 4.250% @ .625/pts 4.500% @ 0/pts

Non-Conforming Loans to $2,000,000

5 Yr Fixed: 3.250% @ .875/pts 3.500% @ 0/pts

30 Yr Fixed: 4.625% @ .625/pts 4.750% @ 0/pts

FHA Fixed Loans to $625,500

30 Yr Fixed: 4.250% @ .375/pts 4.500% @ 0/pts