Rate Watch Update

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Happy Friday March 26, 2010

Yesterday mortgage bonds suffered their worst single day in the market in roughly 6 months, and rates worsened as a result.   Most lenders increased rates yesterday by at least .25% across the board.

What is going on?  First, as we’ve been discussing for months, the Fed is in fact exiting the mortgage bond market in 3 days.  There was speculation they would continue playing “buyer” of mortgage bonds, but after $1.25 TRILLION, there is no political support to continue that program.  Nervous investors are selling in anticipation, driving yields and mortgage rates up with it.

Secondly, Fitch downgraded Portugal’s debt yesterday, so apparently Greece is not the only government in Europe with debt problems.  Bonds around the globe did not like that news and began selling.  Amazing how Portugal’s debt rating can affect mortgage rates in U.S.   Keep an eye on this news, as U.S. is on Fitch’s “watchlist”, should Fitch downgrade U.S. debt, rates would move rapidly.

Good news.  State of CA has extended their first time homebuyer tax credit through August, 2011, and has opened it up to both new construction and existing inventory.   There is no extension on the Federal program set to expire April 30.

Have an awesome weekend, let me know if I can help you or someone you know with any real estate financing.

Mike