The lowest mortgage rates in Orange County are close to 5% for fixed-rate loans. That’s a great rate, brokers say, but it should be even lower since yields on government bonds have fallen off a cliff.
With investor concerns having shifted from inflation to recession, Bloomberg reports:
“We continue to see demand for Treasuries drive yields lower, particularly in the long end, as money managers look for yield and traders anticipate continued Fed and Treasury involvement in the rate markets,” said Richard Bryant, a 30- year-bond trader at Citigroup Global Markets Inc. in New York. The firm is one of the 17 primary dealers that trade government securities with the Fed.
The benchmark 10-year note’s yield fell five basis points, or 0.05 percentage point, to 2.68 percent at 4:45 p.m. in New York, according to BGCantor Market Data. The yield touched 2.65 percent yesterday, the lowest since the Fed’s daily records started in 1962.
Al Hensling, president and CEO of United American Mortgage in Irvine, said as of Monday lenders are going as low as 5.125% for a 30-year fixed-rate loan with a one-point fee. That’s for loans up to $417,000 and with a down payment of at least 20% and a borrower with good credit.
“The rates are just screaming,” Hensling said.
However, Jeff Altman of WestCal Mortgage Corp. in Orange said he’s seeing lenders offer around 5.25% for the same loan with a one-point fee.
In any case, both Altman and Hensling said the rate should be under 5% with the benchmark yield on a 10-year Treasury so low.
But investors are not crazy about buying securities backed by mortgages right now, they said. Go figure.
In other mortgage news…
- Delinquent mortgages seen rising sharply in 2009
- JPMorgan cutting 9,200 jobs at Washington Mutual
- Popular mortgage blogger and stinging media critic dies at 47
- 6% of O.C. million-buck home listings are distressed
- O.C. house prices seen rising in 2013
- Rebuttal to Fed plan
- Paying your mortgage may be the best use of your money
- And now from Wall Street…bets on recovery
- Fed plan should stem credit-card crunch
- Group calls for 180-day foreclosure moratorium
- O.C. mortgage rate drop a “miracle”
- Fed to pump $800 billion into credit markets
If you were a Wall Street investor, would you buy mortgages with a 5+ something return with 20% down as equity in a market where home prices are dropping? In a year or less, your security might be a zero. Probably not. If homes were appreciating, we’d be seeing interest rates in the high 3’s to low 4’s.
Mathew - there’s more going on here than your post surmises. Will have a story on this up tomorrow. best, PJ
With the 10 year so low, mortgage rates should be in the 4% range, but the spread between treasuries and bonds is what’s the problem. no investor confidence.
inwestor!
30 year fixed will be 14% next year.
OC median home price will be 185K next year.
OC unemployment will be 22% next year.
We just elected Jimmy Carter and Herbert Hoover all rolled in one. Such a deal. Two for the price of one.
LOL!!!! Ahhhh Matthew….you never really paid attention in the posts that I tried to teach on these issues at the beginning of the year about how…pay attention now….the 10 year Treasury has NOTHING to do with conforming fixed rate mortgages!!! It is merely an “indicator”…a “tracking device” but not the “benchmark” of Fixed rate conforming mortgage rates. In other words the 10 year and Mortgage Backed Securities….another key word here….wait for it…..USUALLY move in concert with one another as they are both Bonds but as evidenced today, recently, and too many times in the past two years to regurgitate here again (because I explained it in many posts months ago) it is NOT what Conforming fixed rates are based on! Period. End of story. Mortgage Backed Security bond prices DROPPED today! So what did 30 year fixed rates do? They went UP! A quarter of a percent from the close yesterday! LOL! Pay attention folks. I am educating you all on this for your own good.
And Matthew, please stop quoting people like those in your article who like sooooo many in the industry, don’t have the wherewithall to educate themselves on the REAL basic things that move the markets and make comments like “rates should be in the 4’s based on the 10 year”….no my undereducated bretheren quoted here, they should be in the 3’s!!! IF they were based on the 10 year which they…(I am hoping you get it now) ARE NOT BASED ON!!! Fixed rate mortgages come from the yields on mortgage backed securities ONLY! Treasuries equal ultimate safety in a deflationary economic environment and their prices have skyrocketed resulting in their yields plummeting! They have nothing to do with one another.
Class is over on this subject….its really a disservice to keep trotting out misinformed guys about this subject Matthew. Most everyone I have worked for in this industry is just as misinformed as these guys so it is not surprising…most people in the industry only care about the what and how to sell loans but could care less about true financial eduaction…of their clients or themselves! And yes, I do feel VERY strongly on this subject! If you give wrong advice on something so simple to “get” as “where do rates come from” then what other advice are you giving wrong? A half a million dollar financial instrument such as a mortgage is a bad thing to give and worse, to GET wrong advice on!
Rates are affected by both the risk perception on wall street as well as fears of inflation.
should be in the 4’s if based on 10 year, but they ARE NOT, they are based on mortgage backed securities (MBS)…..still why not lower? in a word; lack of confidence. One needs only to check out the VIX. Especially inciteful if you look at 10 year, 5 year historical results…..hell! it was not even this high after 911
Thank you Larry. I get so tired of explaining to folks why the conforming fixed rates don’t go down when the bond rate does.