VA, FHA, USDA and Conventional mortgage rates are dropping after a brief upturn but the question is why are they not dropping faster based on what is happening with the bond market (mortgage backed securities)? Changes in the MBS bond market would indicate a larger drop in rates, right?

Well a lot of the reason this is happening can be attributed to the Congress and the most recent budget deal. To extend the payroll tax cut, a deal was struck that added a .10% guarantee fee to conventional loans and a permanent hike to FHA loans. The following video explains how this all works.

Although the hikes don’t take place until April, they are effecting rates today, due to coupon purchasing. Frank does a pretty good job of explaining how that works.

However, rates are doing extremely well in the marketplace with mortgage backed securities taking a fairly large jump yesterday after the Federal Open Market Committed (FOMC) minutes were released saying they were keeping the rates (short term bank borrowing rates) low unitl 2014. This gave the market confidence that rates would stay low for the foreseeable future, making long term investment in bonds a realistic choice. The following chart shows the activity of the FNMA 30 Year 3.5% bond:

The commentary that I am reading and listening to says that rates should fall much from where they are now, but they also shouldn’t bounce up much from where they are now based on the action of the FOMC. If that is true, and property values have stabilized, it is an excellent time to look into buying that home you have been thinking about. Give me a call today to get pre-approved, the first step in becoming a home owner. You can reach me at 360-682-6913/541-221-3455 Cell or through my e-mail. You can also use the apply now link at the side of this page. I am here to make the process simpler.