Rates
What the heck happed to rates….
That is the biggest questions I have been asked for the last 2 days, and in short, it is the Roaring US economy and the Federal Reserve.
I won’t go into the numbers on all of the economic news this week, let’s just say it was good to REALLY good. So let’s talk about the Federal Reserve.
The Fed raised key Fed Fun Rate by .25, and this was expected and pretty much baked into mortgage rates that have been slowly increasing, prior to the election.
The we had the election, see past blog for that detail. Well the Federal Reserve is expecting that the economy will become pretty hot in 2017, so much so, that they are very concern about inflation. Inflation is bad, just ask any baby boomer during the Carter years.
The Fed’s mandate is to prevent inflation and keep employment high, and to do this, the have to balance on a fine line. Well employment is here, it is estimated that we will be at full employment in the coming months. So now the Fed had to deal with inflation, and to do this, they raise their rates.
The Federal Reserve was expected to raise rates 2x in 2017, what actually came out on Wednesday is that the Federal Reserve IS going to raise rates, at least 3x in 2017. This was a HUGE wake up call for traders and caught most off guard.
You might hear about the famous Fed Dot Plot Chart; each board member puts a dot on where they believe the Federal Reserve rate will be in any given time.
Each blue dot is a voting member of the Federal Reserve board.
Currently we are at .50%, but by 2017, the consensus is that rate will be 1.50. That would mean the Federal Reserve will raise rates, by the end of 2017 a full point. HOLY COW.
So, mortgage rates in the last 48 hours, have worsened by almost .50% in rate. We are now seeing conventional rates in the mid 4’s and government rates in the high 3’s to low 4’s. And based on what we are hearing, we could see mortgage rates into the 5’s by march and high 5’s to 6’s by end of the year.
This chart, which I am alwasy using, green is Good and red is BAD, this is an inverted chart, so as this chart goes down, interest rates go up.
I wanted to insert this chart for a little prespective, this is a chart from June 2015 to today, and you can see just how dramatictically interest rates have fallen off a cliff.
IF you have any borrower’s sitting on the fence post, this should know them off with a sledge hammer.
Lock, lock, lock.
Fannie & Freddie Changes
Well some good new! You will be hearing about a new program called Day 1. And basically, what it will do is streamline some of the documents we, as lender, require the borrower to get for us.
So currently we require the borrower to send us, among many thing, bank statements, tax returns, and paychecks stubs, along with w-2’s.
With the Day 1 initiative:
- As long as their bank participates, we will be able to automatically order their bank statements.
- As long as their employer participate, we will be able to automatically order verification of employments and paycheck stubs.
- And as long as the IRS hasn’t been hacked, we will be able to order tax returns, (we actually currently order these)
This is pretty sweet news, and can shave off some of the time involved for borrowers to get us these documents. Lenders are currently rolling these out now, and we anticipate full roll out with most of my lenders by end of January.