What is causing mortgage rates to drop?

Question

I would like to hear your take on why this is happening . For 3 straight weeks, interest rates have been dropping on 30yr mortgages. My rationale : I think they are falling because the mortgage lenders do not have enough demand but an over-abundence of capital from foreign countrys as the USA keeps buying more imports than selling the world stuff, and its causing another imbalance where the countrys are running out of places to invest.I also think it's further proof the housing bubble has popped.....I suppose many here will say it's going to be good for housing as there is no 'bubble'. I'd still like to hear from you.

Answer 1

On a very fundamental basis, it is that mortgage demand has dropped. Rates can only decrease if the mortgage lenders (1) have access to cheaper funds (2) willing to squeeze their margins.

Regardless of the trade imbalance we currently have, mortgage lenders have money to invest in mortgages and are lowering rates to do it.

It is a further sign that a recession is right around the corner. When the yield curve inverts (longer rates are lower than short term rates), a recession is coming. Just in time for the 2006 elections!

Answer 2

They have an over abundance of money that they must put to work and now that refis are almost all done with they need to find new places to park the funds which they have at very attractive ratesto the consumer or they will not buy the money . The housing bubble is loosing air rapidly mainly cause all the high end houses are coming down in price dramatically . There is alos the fact that alot of people who took adjustable rate mortgages out 3 years ago when interest was at 3% now have to refinace and they are getting creamed . Why they did not take fixed mortgages is beyond me !!! Did they think banks were going to PAY people to take the money ?????

Answer 3

Your dreams. Make no mistake that just because the Fed paused today in raising rates that this is any indication of a slowdown in rate hiking. Just because the housing sector is being hard felt right now, isn't to say that other sectors of the economy won't even out in the near term. I would look for a stoppage to rate hikes once the market absorbs the adverse selling capacity and new home sales continue to rise. Having peaks and valleys is what causes the boat to tip over and Bernanke is putting on the right touches to stave off unnecessary inflation.

Answer 4

I agree that supply of money and weakening demand for loans as the housing market slows down, is the main factor. Plus mortgage lenders compare the rate of return from lending the money out at whatever percent they can get for it with the return on other investments. With stocks and bonds performing so poorly lately, locking in what might seem to be a low rate of return might compare favorably with other alternatives.

Answer 5

This is from an AP story dated 8/10:

Analysts attributed the latest decline to continued evidence that the economy is slowing, which should ease pressure on interest rates, and the decision by the Federal Reserve this week to call a temporary halt to its two-year campaign to push short-term rates higher.

Answer 6

Adjustable cost Mortgages (ARM) are suffering from what the Fed does. while you're at present in an ARM it won't influence your cost till while you're nearing the adjustment era. lenders examine the Fed Fund cost 40 5 days past on your adjustment date and upload the margin (generally 2.seventy 5% if i bear in mind exact). fixed expenses are actually not drivien with the aid of what the Fed does yet they have an inclination to follow the yield of the ten 12 months treasuries.

Answer 7

The rate will only go higher.

Answer 8

Wow I did not know that they had dropped. but when they do it because of the economy I thought but who know this day and time.

Answer 9

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