Financial Update by Maurice Soussé

I really don’t know where to begin this week. Mortgage backed securities were off over .300 basis points. Yes, that is not a typo and for those who don’t understand the numbers, that it is called a total meltdown. On Monday rates went up an .125% on a hedge by traders bracing for the comments to come from the FED meeting. On Wednesday Chairman Bernanke said the FED is carefully watching the economy/growth and had the ability to buy more mortgages or cut back on the purchases as the economy begins to recover. Mr. Bernanke DID NOT say they were cutting back on purchasing mortgages, but, all the market heard was a tapering of mortgage buying. This sent the market in to a nose dive beyond proportion and lock desks all started closing and not accepting locks. The markets settled about 4pm eastern time with rates coming out a .25% higher. But wait, it gets better. Friday the market deteriorated further with rates going up twice yesterday, leaving us with the attached rate sheet today.

To keep this in perspective, the 10 year treasury has not been over 2.5% in over 1 ½ years so this is a big benchmark. Will rates stay at these levels? Maybe… Usually when you have rates push up that fast you will find a slight correction in the market place and we’ll see some down days that we can take advantage of. Let’s look at the realty of rates…..4.25%? Fantastic rates over the history of time…

Here is how the payment differences play out:

$400,000 Loan Amount for 30 Years

  • 3.875% Rate – $1880 P&I
  • 4.25% Rate – $1967 P&I

The end of the world? Absolutely not, but, buyers should jump off the fence and get into the game before it gets too late. People getting rates today will still be able to brag at cocktail parties 3 years from now.

In light of the week’s events we turn to Henry Ford who was always a positive thinker. Mr. Ford said “If you say you can or you can’t, you are right either way.”