Market Analysis

The bond market continues to worsen today primarily just on momentum from the past several days.  There was no significant economic news released today and the stock market is not gaining ground so far today either.  While some are starting to question whether the Fed will cut their Funds rate by .25% next week, most analyst still expect that cut.  A Fed cut, in and of itself, will not lower mortgage rates, as a high expectation of the cut is already built in to long term rates.  It is very difficult to gauge a direction for rates right now.  There are multiple cross currents of conflicting information.  The dollar is strengthening. However,  it is not clear whether that is because of expectations that the US economy is improving or if it is just going to stagnate for awhile while the rest of the world starts to see slowing.  We know that the dollar is not strengthening because of fiscal restraint on a Federal level which would translate into a lower supply of Treasury notes on the market.  A strengthening dollar is good for bonds from the standpoint that it makes them more attractive to foreign investors who have to translate their interest earned back into their own currency.  However, the dollar may also be strengthening because investors believe the US economy has bottomed out and is poised for a recovery.  A recovery would translate into more inflation pressures on what already are very high levels of inflation.  Our position is that it is safer to lock in times of uncertainty and then renegotiate if the market bounces back.   If you would like to lock with us, the first step is to be pre-approved.  You can access a short application form at http://www.ironharbormortgage.com/xSites/Mortgage/IronHarbor/Content/UploadedFiles/Iron%20Harbor%20Short%20Application.pdf
If you lock and the market improves dramatically, we are able to renegotiate once and get within .375 points in closing costs of current market.  For example if the market improves to 5.75% with 0 points, we can renegotiate once to 5.75% with .375 points.  It is important to note that even though when renegotiating there is a .375 point adjustment to closing costs, usually we renegotiate rates to a rate sheet that is very short-lived and, therefore, most of our borrowers get a better rate renegotiating than if they were just trying to call in and get their loan registered and locked to start with.
Posted by Matthew Breston on April 25th, 2008 9:39 AMPost a Comment (0)
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