March 14, 2008
Happy Friday all!
The mortgage biz continues to be a wild, crazy, and REALLY fun business to be in these last few weeks. Core CPI numbers came out this morning and in surprise to many, were unchanged since last month. This is good news for us in the mortgage business because rising inflation is typically BAD for Mortgage Interest Rates. However, the glee on wall street was short lived amid the news that financial giant Bear Stearns has gotten a couple huge adrenaline shots—in the form of HUGE loads of money—from the NY Fed, as well as competitor JP Morgan. It appears their liquidity position has weakened them to the point that without these “Payday Loans,” Bankruptcy or closure was a real possibility. So why should we care about this? Simply put, our economy as a whole is measured by many people by the success or failure of the really big financial companies out there. Countrywide solicited and received a big loan from B of A, and then it was announced they would become the property of B of A. And now Bear Stearns is getting help from the NY fed, and JP Morgan to keep the lights on. When these HUGE companies suffer, the ramifications are enormous to the economic stability of the country, as well as a sign of weakness to our global economic partners. So when we see the big boys on wall street playing nice and helping each other out in times of need, it should be evaluated as an indicator of future market direction. Not surprisingly, there’s been a HUGE sell off on the street in the financial sector….May be a good time to call your broker and place an order while these stocks are on sale…..
Not surprisingly, the Federal Reserve hinted at another fed funds rate cut by .75%. And we may see it before the FOMC meeting next week. This is BAD for mortgage rates. Remember the Fed’s ONLY job is to control inflation. When they drop any of the 3 benchmark rates they control, it’s in an effort to stimulate the economy. And when Mortgage Backed Security Buyers see economic stimulation, they typically start investing in stocks. So the MBS traders have to offer HIGHER prices to keep them interested…and for you and me, that means HIGHER mortgage rates. As we’ve seen countless times, Fed cuts can often cause mortgage rates to spike upward…..
The good news is that if you have a home equity line of credit that’s tied to the prime rate, you’ll likely see your rates drop.
Carl Salvo
Mid Oregon Lending
497 SW Century Drive · Suite 104
Bend, Oregon · 97702
Ph. 541-728-0390 · Fx. 541-728-0395
Oregon License ML-4707 · NMLS # 277334
