Mortgage Rates Fall in the Fall

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

I recently came across an interesting chart I thought I'd share, that shows mortgage rates often trend lower at the end of the year.

The data above was culled from FHLMC's data that is published weekly.  Please note, that this data also tracks the average points charged (0.7 points in the graph). 

I've had many calls from rate shoppers so intent on finding the lowest rate, that they foolishly don't take the time to understand the whole picture, nor listen to an expert (myself) trying to explain it.  You can cure ignorance, but not stupidity.

Now, before you go planning on waiting to refinance until December 31st to get the lowest possible rate, remember that the past is not a reliable predictor of the future.  Just look at our recent economic mess for proof of that - so called Wall Street experts based a lot of their actions on past market movements and look how that worked out.

Here's a chart of Mortgage Backed Securities over the last 6 months:

In this graph, green is good and since this chart tracks PRICES, not rates, higher means lower rates.

As you can see, rates have been heading in a favorable direction since mid-October.  They did though, have a slide at the end of September and were flat at the beginning of October.

The more technical of you will notice that prices have moved above their 25, 50, 100 & 200 day moving averages - typically a sign of a strong rally.

How long will rates stay low?  Not much longer.  The Federal Reserve is artificially holding rates low by buying Treasuries and Mortgage Backed Securities.  They've announced their intentions to end these purchases by the end of March.

Look at the chart above.  Rates started their dramatic improvement last fall when the Fed started their buying binge.  Mortgage rates have improved by over 1% since then. 

It's not a stretch to anticipate they will increase by 1% when the Fed stops buying.

So, if you or anyone you know has a rate above 5.5%, give strong consideration to looking into refinancing now. 

Just don't make the mistake of waiting for the market to get where you want it and THEN applying for a mortgage.  Chances are, it'll take a day or two to get all the paperwork sorted so you can lock an interest in - and by then the rate could be gone.

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In addition to real estate lending, consulting and investing, Drew Sygit writes & speaks about the mortgage & real estate industries.  He holds mortgage industry designations CMPS, CMC, CRMS, CMLO, CALO, has an MBA and is an approved industry instructor.  He's presented, spoken and/or written for HUD, Financial Planning Association, Financial Planners Association of Michigan, Michigan Association of CPA's, Institute of Continuing Legal Education, Oakland Real Estate Investors Association, North Oakland County Board of Realtors and numerous industry publications.  For speaking engagements and questions he can be reached at dsygit@TheLendingEdge.com.