Interest Rates Have Risen

That’s right even with the Fed’s buying of Treasuries.  There are so many people out there that leading up to QE2 (Quantative Easing 2, the Fed’s announcement of their bond purchases) thought rates would drop and took a gamble.  Interest rates before their announcement at the beginning of November were around 4% paying no points on a 30 year fixed.  Now they are at about 4.875% paying no points, WOW!

“If you don’t read the newspaper you are uninformed and if you do read the newspaper you are misinformed” – Mark Twain.  Don’t believe everything you read and you need to talk to an expert on mortgage-backed securities.  An expert is someone who follows mortgage bonds real time everyday and knows what makes them move.  Most who have commented on the work QE2 have no idea what it means. 

To start off, the Fed is buying Treasuries which are not what interest rates are tied to.  Treasury bonds can have an indirect affect on interest rates but mortgage-backed securities are what interest rates are tied to.  I would be lying to you if I didn’t think that the Fed’s announcement would have an impact on interest rates but I wasn’t about to gamble.  I locked all of my loans in prior to the announcement and prepared those who may be able to lock in an interest rate on a refinance if rates were to fall. 

The bottom line is that no one can be certain what interest rates will do but you can remove the risk by locking in an interest rate and if interest rates improve you can renegotiate your rate lower.  Make sure to talk to your mortgage professional about renegotiations because each lender has a different policy.  At the end of the day it’s better to be locked wishing you were floating then to be floating wishing you were locked.