Fed just lowered interest rates another quarter point...
 

do any of you mortgage brokers have any inclination how this will effect long term mortgage rates tomorrow?

Can I add to Shane's question for you mortgage types?
I close on my new house in 3 weeks. Obviously, I already have a rate locked. If it does inded go down again, what can I do about it? Anything, or am I stuck with what I have?

I'm not a mortgage broker and I don't play one on TV either but...

I wouldn't worry too much about rates going lower.

Fixed rate mortgages are based on the U.S. treasury bond market and not based on the federal funds rate (the rate that was lowered today and is the rate at which banks loan one another funds). The initial reaction in the treasuries market is that yields went up slightly so mortgage rates shouldn't drop tomorrow morning. Heck, they might even go up a little. If you've already locked in a great rate sit tight and enjoy.

I understand how the fed funds rate works etc.. I also know that a friend at M&T Mortgage called me and said they expect rates to be lower in the AM. I am a full point lower now than when we originally financed and could be another point lower tomorrow than what are current rate is. He said they are thinking rates could drop 1/8 tonight.

I am in the process of refinancing my house at the moment. I had a rate of 6.75% and am locked right now at 5%... if the rates go any lower I may just see if they will lower it before we close on the 16th.

Good luck on getting your mortage rates down. My concern is the money markets, we are currently paying 70 basis points and would expect to see it drop below 50 basis points over the next several weeks. Some of the money market funds are already on the verge of losing money and their future is questionable with this latest rate cut. If any of them start trading at less than $1.00 I am concerned that this may do more damage than the Federal Reserve expects.

Larry,

Ahhh, the "breaking the buck" scenario. I would beg to differ just a littel with your above comment in that they are really not losing money, they are still net positive on income, just they are not making as much. I too share some concern as the bond market has reacted negatively as expected. Once they venture into negative territory, all bets are off. What do you think UT? banks are your specialty.

Shane,

I guess a lot depends on how investors perceive the rate cut. If people think it will help the stock markets further recover, then wouldn't bonds sell off somewhat as the money shifts more into stocks? If this happens bond yields would go up and mortgage rates would go up too. I can't imagine mortgage rates can go much lower than they were a week or two ago.

TulsaLarry,

Good point on the money markets. The fed is pulling out all the stops in an attempt to stimulate the economy. If you don't own as much house, or houses, as you can afford you probably aren't content financially in the current economy. I wonder how big a long term problem we will experience when seniors deplete all their savings after previously being able to live simply on interest income.

Shane,

What about expense ratios on money market funds? If rates go to .5%, and expense ratios are in that range or higher they could actually lose money unless they lower costs to the investor.

Rob M you EXACTLY correct. 100% SPOT ON! Which is why I said they are still profitable just not as profitable as they once were. If they do not reduce their internal expense ratios they will no longer be able to support a price of $1.00 per share which is where they try to maintain themselves. I guess I am just not as articulate as you are.;) Sorry. I guess we were basically saying the same thing only you were able to do so more succinctly. Money funds have not yet hit the point where they are below a buck but they are sure wandering into that territory. As far as 30 year mortgage rates go, you are probably right in that I missed the absolute bottom last week as the futures market usually prices these factors into the equation. However, as of late 30 year rates have been fluctuating more than normal and I have spoken with a few people in that business that speculate that 30 year rates could drop a tad. I guess I am just hopeful. Sorry that I was not as clear as I could have been and thank you for doing a good job at clarifying that.:)

I'll tell you where the money markets will cut first. I make a 10 basis point trail on my money markets, some money markets pay their brokers as much as 25 basis points, and this will be the first expense cut. This is not a major deal, but I have been in the business long enough to know that once it is taken away it will never come back (kind of like a temporary tax, yeah right). Most of the funds do carry around a 1/2% expense (some higher) so expect the funds to get pretty lean.

The Fed does not meet again until August so I guess we better learn to deal with it.:confused:

Low rates... Time to go get more toys... :)

Shane,

Thanks for the kind words. Though I'm not in the market for a home or refinance at the moment, I've been watching the rates go down (and home prices continue to skyrocket), and wishing I had kept the modest townhome I sold over the winter when I moved into the wife's similar home. I must have been lowering the value of the neighborhood because comparable values have risen 15% in the past 5 months. Unreal.

Larry,

That is surely one thing I DO NOT MISS about the retail side of the business. They can really put the screws to you and they only ones they are hurting are their revenue streams. Best wishes.

Shane

All of my investors had a rate increase by the end of the day. My advice to those doing a refi, close with the rates you have as they will be going up soon!

The market already had the rate cut built in. It would not surprise me to see long term rates increase, see the question was will the cut be 1/4 or 1/2? SO I believe that it overcorrected a bit to hedge the difference, now that it is 1/4 I believe they will increase slightly for a time.

Also anyone look at the yield curve? Flat... that means something has to give and i think it will give at both ends, short term rates down (thanks to the Fed) and an increase in the long term rates.

Anyone catch the sell off of treasuries the other day as people sucked up some bonds by GM I believe?

I'm closeing on a 30 year jumbo refi at 6 1/8% on friday, today I found a bank that will do it at 5.88%. Wardey

CRAZY!
 

I am a real estate closing attorney and I have NEVER seen ANYTHING like this...this is INSANE!

Rates are either at or close to the bottom. The bond market sold off immediately when the Fed announced the rate cut as many traders were figuring 1/2% and had to adjust their postions accordingly. As long as the economy shows addtional signs of weakness or deflation, traders will continue to think that rates may fall again and we may see a slight decrease. But, and a big but, if we see some continued signs of improvement or any inflation.......look out. Mortgage rates always move up faster than they come down. As long as the job market remains weak, the economy can only do so well but when it starts to improve the rest of the economy will improve and rates will increase.

The interest rates are down......Now if they would just lower the ''principal'' rate, I could get that new ''Cig''.:D

I'm a mortgage broker and follow this very closely.. The .25% rate cut was already priced in to the market last week. The key to yesterday's rate cut is the underlying statements by the Fed...there is still concern for more economic weakness, however there are some signs of a turnaround. They Fed clearly left the door open for another possible rate cut...It will take a few days for the dust to settle, which will most likely leave rates close to current levels, with a pretty good chance that they will drift slightly lower as the summer moves on. The key is when and if any economic growth will creep back in....The fed is clearly trying to fuel the growth, however, it may have been premature... Stay tuned to the consumer confidence and unemployment levels...Real estate seems to be propping up an otherwise lagging economy.

P.S. I write loans in all 50 states and will discount to all OSO members!

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Marcus Z.