After every single speech by Bernanke or President Obama, we have seen mortgage interest rates get all the way back down to 5.05%.  This is where we sit today but things are a little different than in the recent past.  The 10 year treasury rate yield has breached its 50 day moving average and that moving average is now moving down!  This is a sign that we are likely to see a move down or sideways for the 10 year yield.  This is great news for current mortgage rates.

If there is a speech by a Fed governor or our president this week about interest rates remaining low, we could see mortgage rates drop below 5% for the first time since May.  This would be huge news for the refinance market because there will be a definite increase in interest in refinancing which will greatly help the housing market and the overall economy.  There is one fear that I have about mortgage rates currently at this level.  The Fed has announced the are going to stop buying US Treasuries by the end of September or October.

This is extremely bad news when it comes to the yield on Treasury rates.  If the Fed does stop buying Treasuries who is going to buy them?  As a country , are we back on our feet enough where other major world powers are going to buy our debt?  I sure hope so because if they don’t we could see a very strong move up in treasury yields which would mean much higher mortgage interest rates.  Sadly, this could happen very quick if the Fed pulls their hand out of the pot quickly.

With that being said, now is one of the best times in history to refinance or get your first mortgage.  Mortgage rates currently sit at 5.05% and mortgage lenders are happy to work with you because they want your business.  Many companies are advertising mortgage rates under 5% already so it might be a good idea to contact some of these companies and see what type of mortgage rate you can get!

Author: Jesse Wojdylo

The current mortgage rate trends are showing that mortgage rates are likely to move higher in the next few weeks.  The 10 year treasury rate yield continues to move higher; a move in the last two weeks from 3.3% to 3.7%.  There was a slight pullback Friday but nothing that would be considered a trend breaker.  The alarming issue at hand is the fact that the yield has moved much higher yet average mortgage rates have yet to blink.  We have seen a slight move higher, but nothing as we should expect.

Armed with the knowledge that the 10 year treasury rate is in a strong uptrend, we should expect mortgage rates to follow suit.  The last time there was a major disconnect in mortgage rates and the 10 year yield, we saw a huge one week jump in average mortgage rates.  There was actually one day in which rates moved as much as .75%.  It will be very scary if that happens to be the case again.  If we see a push up that much, average mortgage rates would be above 6%.  That would definitely be headline news.

I do not think this will be the case until we see another push closer to 4% from the 10 year yield.  If the yield pushes higher and mortgage rates do not, we can expect another one of those days and we will see headlines all over CNBC about how mortgage rates skyrocketed.  I will gladly say, I saw it coming. 

The record low for the Freddie Mac weekly survey was set on April second and that data showed mortgage rates at 4.78%.  Since then overall mortgage rates have been quite volatile; moving all the way up to 5.59% and now back down to 5.14%.  From CNBC:

The drop in rates is a positive for the U.S. housing market, which has been showing some signs of stabilization, with sales rising and home price declines moderating in many regions of the country.

This is fine and dandy but interest rates are going to head higher!  I am not sure which regions of the country they have been looking at, but from every indicator I see, home prices are still falling.  Also from CNBC:

Mortgage rates remained above 5 percent for a seventh-straight week. Experts say mortgage rates at 5 percent and below are the levels needed to make a significant impact on home loan demand.

Well, it looks as if the housing market is going to get a lot worse because we are not going to see mortgage rates under 5% for quite some time unless the government starts printing A LOT more money.  There is only so much money the Federal Reserve Bank can inject into the economy.  It looks like the market is finally going to set interest rates and that means we are going to see mortgage rates push their way towards 6%.

The current real estate market has been struggling for quite some time; this is nothing new to most of us.  The way that President Obama and his advisers are trying put a bottom in the housing market is be keeping mortgage rates extremely low.  For the first half of 2009, average mortgage rates have been around or below 5%.  Unfortunately we have yet to see data to prove that low mortgage rates are helping the housing market.  I will admit that most of the data we do have is several months behind, but it would be helpful to see home prices stabilizing.

With that being said, now is one of the best times in history to buy a new home or refinance your current home.  One thing is for sure, the government is not going to let mortgage rates move up very much.  Whenever we see a significant move higher in mortgage rates, the Federal Reserve announces that they are going to buy back billions in dollars in US debt on top of what they have already committed.

The Federal Reserve spent $280 BILLION in US debt for the first half of the year.  It is very possible that they will spend even more in the second half of 2009.  While this is very bad news for the future, see inflation, it is great news for current and future home owners.  If you have been thinking about refinancing, now is definitely the time to start doing some research.  The first thing you should do is make a mortgage rate prediction on where you think rates are going.

Luckily, I will do that for you every week.  Each Monday I make mortgage rate predictions and they have been rather accurate so far.  Feel free to look back on some of my past columns and compare them to the mortgage rates survey that Freddie Mac releases each week.  With that being said, the mortgage rate predictions for this week are

30 Year Fixed Rate Mortgage – 5.05%

I full expect to see mortgage rates lower this week as the 10 year treasury rate yield tanked last week.  We could see a bit of a bounce back early this week, but nothing significant enough to push average mortgage rates higher.

For those not aware, the 30 year fixed rate mortgage and the yield on the 10 year treasury rate have a very strong correlation.  As one goes, so goes the other.  When the Federal Reserve makes the decision to buy government debt, it almost certainly forces the yield on all treasury rates to drop significantly.  Earlier this week, the yield on the 10 year rate dropped almost 5% in one day because of the actions by the Federal Reserve Bank.

Since October of 2008, there has been a strong downtrend for current home mortgage rates.  There was little debate as to where the trend would lead mortgage rates.  For quite some time, every single week showed declines in mortgage rates.  Most of the reason for this is the fact that the economy has fallen apart and the government thinks one of the best ways to fix it is by forcing daily mortgage rates lower.  Eventually low mortgage rates will pique the interest in new home buyers, right?  Maybe not.

Since the steady decline in mortgage rates occurred back in October, home prices have continued their slide.  Many market mavens felt that the month of March or April would bring about a bottoming process in home prices because the average 30 year fixed rate mortgage was under 5% for almost two whole months.  The Case-Shiller data does not show that the low mortgage rates helped all that much.  We are slowly started to see data that shows a couple of markets are up month over month, but there are still no markets that are up year over year.

This is disheartening to anyone who currently owns a home, especially if they are trying to sell it.  Even though current home mortgage rate trends are pointing lower, there is still not a heavy interest in the housing market.  Some home owners have had their homes on the market for over two years and have yet to get an offer that is even remotely acceptable.  With mortgage rates going lower, one would think that homes would be attractive, but it is just not happening yet.

The only thing that will make home buying attractive again is for the unemployment rate to decrease.  The only Americans who can logically afford to go home shopping right now are the ones who have money saved up.  There are very few industries that are creating a lot of money right now, so many hard working Americans are just trying to get by rather than buying a home.  When the unemployment rate decreases and more money is injected into the economy through private enterprise, we should see a bump in home prices and the interest in the housing market.

Current mortgage rates have moved from 5.59% down to 5.2% in the last three weeks.  Average mortgage rates are likely to move even lower because the yield on the 10 year treasury rate has broken a major support level.  The purchasing of US Debt by the Federal Reserve Bank yesterday helped to push interest rates much lower.  For quite some time the government has talked about putting a cap on interest rates and it looks like that is exactly what they are doing.

Eventually, the Federal Reserve Bank is going to stop printing money at will, but no one really knows when that will happen.  Maybe when Ben Bernanke is ousted?  It sounds nice to have low mortgage rates now, but it is likely to cause hyperinflation in the very near future.  If the Fed continues to buy US debt with money from their printing press, all it is going to do is cause the value of the dollar decline even more.  It may seem like inflation is in the distant future, but it could happen sooner than you think.

As soon as our friends throughout the world realize that the United States is in financial trouble, we are going to see the treasury yields shoot up because no one is going to loan us money at rates around 3%.  That would be like giving someone with a 520 credit score a mortgage rate of 4.75%.  Basically, the United States is turning into a subprime borrower and when the lenders figure this out, we are going to be in big time trouble.  The major positive that the US does have is that we have been one of the strongest financial nations for a long time.  This is the exact reason we continue to get low interest rates on borrowed money.

Hopefully we can recover and get out of this recession before our lenders realize that this could last much longer than we think.  To compound matters, our Vice President comes out and mentions that they underestimated the severity of the financial crisis.  WOW!  Just what we needed to hear.  The leaders of our country underestimated the severity of the problems.  This is not good news for the future of this country!  Maybe Peter Schiff and Jim Rogers need to start giving President Obama economic advice.

Current mortgage rates are very likely to move higher in the next few weeks.  Since the middle of June, average mortgage rates have pulled back from an intermediate high, mostly because of the sell off in the 10 year treasury rate.  The government continues to auction off bonds which is saturating the market; this has caused the 10 year to pull back all the way to its 50 day moving average.  After going from 4% down to 3.45%, I find it highly unlikely that we will see the 10 year break the support level of the 50 dma.

Today we are seeing a push higher from the 10 year and I would expect that to continue throughout July.  Current mortgage rates are likely to follow the trend of the 10 year treasury rate as they have a strong correlation.  We don’t know where the 10 year uptrend will stop at, but if it returns to 4% look for average mortgage rates around 6%.  Obviously this would be very bad news for the housing market as it would cause prices to continue to fall.  Maybe this is exactly what we need to finally flush out the bottom in the housing market and start to head higher.

The scary part about current mortgage rates heading higher is the fact that it will reduce the amount of mortgage applications by quite a bit.  There have been several major news headlines stating that mortgage applications have shrunk due to uncertain mortgage rates.  You can be rest assured that the amount of applications will decline even more if daily mortgage rates reach the 6% level.

To make a strong prediction of where mortgage rates are headed make sure to keep up with the 10 year treasury rate.  If the treasury rate starts to head higher, it is almost a given that the 30 year fixed rate mortgage will follow.  I am sure the government will try to keep mortgage rates around the 5% range, but eventually the market is going to set interest rates.

Freddie Mac’s weekly mortgage survey showed that average mortgage rates for the 30 year fixed rate mortgage this week were 5.38%; this is actually less than my mortgage rate predictions, but I was quite confident that rates were going to fall as the 10 year treasury note has taken a tumble since reaching 4%.  Today we are actually seeing a 4% daily bounce in the 10 year so we will see if that picks up any steam.  Current mortgage rates are likely to remain volatile as the treasury yields have been extremely unpredictable lately.  The best thing for the current housng market would be for mortgage rates to stablize, but it does not look as if that is going to happen.

The 30 year fixed rate mortgage has taken quite a wild ride in the last month.  This is not good at all for the sentiment of the market.  Mortgage rates are hard enough to figure out as it is.  Home buyers want to see stablized, lower rates so they know what they are jumping into.  That has definitely not been the case as average mortgage rates have moved as much as .75% in ONE day over the last few weeks.  Hopefully this is not discouraging home buyers, but be rest assured that it is making people think twice.

Another major factor with current mortgage rates flucuating so much is that refinancing is harder to do.  If home owners were considering refinancing and they see that average mortgage rates have been all over the map, some of them feel it is not worth the time, effort and closing costs to go through with the process.  This is going to hurt the economy even more as it will be less money in the pockets of home owners who are considered prime borrowers.

The cream always rises to the top; today this seems more true than ever as JP Morgan Chase reported that they have repaid their entire TARP funds.  This was a firm that really did not even need TARP money, but when the government is giving out free cash, why not take it right? Unfortunately, some of the financial institutions who received TARP money need it just to survive, eh hmmm, Bank of America and CitiGroup.

It is quite ironic that JP Morgan Chase has paid back all of their TARP funds while Bank of America and CitiGroup continue to struggle.  The irony is the fact that the Bank of America and CitiGroup CEO’s stated that they would repay TARP funds.  I guess those CEOs that keep their mouth shut and actually do their job are the ones that show the best performance.  I would like to commend JP Morgan Chase and I hope Bank of America sees what true leadership and honesty can do for a company.

Just a quick note on the 10 year treasury note yield.  Many of you know how much I have reiterated this over the last few weeks, but I wanted to give you a nice visual of the uptrend.  Note that support is way down at 3.2% or so but there seems to also be more upside potential.  This is going to get very interesting in the coming weeks as this will greatly affect current mortgage rates.