FollowThe Bouncing Bond Market!

For those that take the time to check this blog often, you will notice that over the last two weeks we have had the past two Mondays highlighted strong buying on the bond market which has driven the 30 year fixed interest rate to 5.875% and then 5.75% this week. However as you will now see, in both cases that rate did not hold through the week. On Thursday and Friday of this week Wall Street came to the conclusion that they were not going to get the .50% rate cut from the Fed that they wanted. Once that happened the blood letting began on the bond market and the 30 year fixed that was once at 5.75% is now at 6.125%. For all those inexperienced loan officers, the look on their faces as they watched the rate changes occur almost every hour for 2 days straight was priceless. Actually there was a price, it was the price that they had to pay to honor the locks that they had committed to and had not taken the time to lock with the investors.

So what does all this volatility mean to the homeowner? The millions of Americans who are looking for some relief from their mortgage payment; what do they do? Maybe the ones who were aggressive and took out 3 or 5 year adjustable rate mortgages in 2002 and 2003 and now those A.R.M.’s are going to start adjusting. They had a chance to lock in over the past two weeks at less than 6%, but only if they were on top of what was going on or their loan officer was. I know I personally talked to 10 people over the past two days that I had called on the previous 2 Mondays but they didn’t bother to return the call until yesterday or today. For them, all I could do was tell them they missed out and offer to get there information ready for the next time rates drop. But will there be a next time?

We will find out more this week when the Fed meets. At this point my crystal ball points to a .25% rate cut. Given the swing on Bonds Friday this may push the 30 year back to 6% or maybe slightly below. After that I think the Fed is going to hold steady and not do anything for another 60 days.

For your comments or questions, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.