Tuesday, December 8, 2009

FLOAT or LOCK? Phoenix Home Mortgage Interest Rate Update and Recommendation - Dec 8th, 2009

Current Pricing of FNMA 30 Year 4.5% Bond: $102.12
+31 bps (Prior Close – $101.81)

Market Update: Mortgage Backed Security (MBS) pricing is higher today from yesterday's close. Yesterday, Federal Reserve Chairman Ben Bernanke said interest rates and inflation will remain low, and the economic recovery faces “formidable headwinds.” Bernanke's speech gave investors enough uncertainty to pull money from Stocks, Gold and Oil thus parking their money in Bonds. From Friday, MBS have increased 59 bps in price. For a consumer, this translates into an upfront fee reduction equivalent to .50% of the loan amount in order to obtain the same rate available on Friday for a home loan. An increase in bond prices causes home loan rates and/or fees to decrease.

Economic News: There are no economic reports for release today, and the calendar for the rest of the week is light with news. Bond trading could be volatile when the results of this week’s Treasury auctions are announced.

Recommendation: FLOAT

The decision to float or lock your interest rate can save, or cost, you thousands of dollars over the life of your new mortgage. Our recommendation won't apply in all situations, so if you have questions please contact us for clarification. Also, if you're considering purchasing or refinancing and you would like us to arrange your financing please contact The Krushinsky Team at 602-695-7575 or email david.krushinsky@wjbradley.com.

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