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Monthly Archives: September 2017

The Great Roll Off Begins


Federal Reserve officials wrapped up their latest meeting (which occurs every six weeks) and announced what most market watchers expected them to announce: The Fed will shrink its massive balance sheet. The balance sheet holds mostly Treasury securities and mortgage-backed securities (MBS) -- roughly $4.5 trillion of them. 

Rates Ascend After the Latest Dip

Row Home

We’ve counseled borrowers to lock on the dips in recent months. The latest dip was deeper and more prolonged than most, but it was still a dip. It has become less of one this past week.

Many investors have cycled out of the haven investments -- namely U.S. Treasury securities -- and cycled into riskier investments, namely stocks. Treasury prices are down, stock prices are up. This means Treasury yields are up as well. The yield on the 10-year U.S. Treasury note is up 10 basis points in the past week. Mortgage rates have been up nearly as much. 

Despite the rise, opportunities still exist to lock a 30-year fixed-rate conventional mortgage below 4% on a best-case scenario. The opportunity, though, has become less prevalent in recent days. The opportunity could become even less prevalent in subsequent days.

Across the Atlantic, consumer-price inflation made a surprise appearance. Inflation in Great Britain spiked to 2.9% on an annualized rate. The unexpectedly high inflation number stoked speculation the Bank of England may raise interest rates sooner than later. 

Because markets are interdependent, it’s hardly beyond the realm of possibilities that the same surprise could occur on our side of the Atlantic. We noted last week that inflation may not be manifest in consumer prices, but it has been manifest in investment and asset prices. It’s just a matter of time before inflation manifests in consumer prices. When it will manifest is anyone’s guess. Because it’s anyone’s guess, borrowers assume a risk for waiting. 

Why the focus on inflation?

Few factors influence the long-end of the credit yield curve as much as consumer-price inflation. Even if we get only a whiff that a change is in the air, long-term interest rates will be the first to experience it. Rates can spike higher with little warning. 

As for the here and now, quite a few prescient borrowers have exploited the latest dip. Mortgage purchase applications rose 11%, according to the latest weekly data provided by the Mortgage Bankers Association. The increase lifts the year-over-year gain to 7%. 

The MBA also tells us that credit availability is again on the rise. The MBA’s Mortgage Credit Availability Index increased 0.7% to 180.2 in August. The purse strings aren’t quite as loose as they were this past spring, but they’re close enough.

What are Mortgage Points?

Autumn Home

The mortgage process is complicated, and some of the terms used can be confusing. One term that is often found in a home loan application or a mortgage refinance alongside the discussion of interest rates is "points," also called "discount points." These points are a way of describing how you will pay off your mortgage and what sort of discounts you will be afforded by your lender. They come in several different varieties. 

Why Use a Real Estate Agent?

Fall Home

Buying a home, and even selling one, are often expensive ordeals, so it makes sense that we want to keep costs as low as possible. Some look to trim their budgets by taking a second look at some expenses like contracting a real estate agent - but is this really worth it? According to the facts available, it's clear that using an agent to help buy or sell tends to pay off, even in a home market that's easier to search through.

Whether working as a buying agent or helping you sell your home, real estate agents do come with a number of tools and expertise that the average homeowner wouldn't have access to otherwise. explained some of the biggest advantages gained by working with a trusted professional:

  • Experience and insider knowledge: Buying or selling a home is an extremely complex affair, with plenty of technical terms and legal hoops to jump through. One of an agent's primary goals is helping their clients navigate this minefield of jargon and regulations.
  • More search tools: Agents specialize in taking their customer's exact needs for a new home or from a new buyer, and tailor their search accordingly. While a variety of online tools help non-professionals do the same, doing a really thorough search for a new home still takes a significant amount of time for the average person.
Bidding wars: In the last few years, the housing market has been heating up, to the point that it's white hot in some parts of the U.S. In these areas, sellers can expect to juggle multiple offers while buyers need to think strategically and act quickly. Without an agent handling these negotiations, both buyers and sellers can expect to be left in the dust.