By Carissa Abazia

Here is more information you can share with your clients, colleagues, friends and family who are asking about 0-3% interest rates. Again, mortgage rates are not affected by Sunday’s fed rate cuts.

Here is the first problem we must deal with:

The media gets their information about rates from what Fannie Mae publishes every Wednesday for the prior week’s interest rates. So when rates are posted on a Wednesday, it is the average rate from last Wednesday to the day the news is broadcasted. That means the average rate that is announced in the news could be nowhere near what it is TODAY. So people are hearing on the radio, and reading the news, that rates are 2.99%…. well, they are not. Every lender is the same & in a serious shift in interest rates.

Here is the second problem we must deal with:

Lenders have creative room when it comes to advertising. Realistically it’s impossible for lenders to write a new ad every day when rates change, and rates do change daily. The rule: The advertising rules for lending were written in such a way that a lender can use any rate in their ad if it was a valid rate in the last 90 days. Well guess what, that means for the next 85 days, they can advertise 2.99% interest rate or 2.600% interest rate & they can say that on the radio! Buyers are going to hear that and say “Oh, I want that rate! Can you please give me 2.600% because that is what I head on the radio this morning on my way to work?” It’s called bait and switch, people – don’t buy into it.

In conclusion:

The value of the bonds from November to last Monday went up & up & up, which is good for mortgage interest rates. Value of bonds go up = mortgage interest rates go down. We hit the peak on Monday, March 9th. Monday the 9th was the absolute best rate we’ve ever had. But it came down quickly and fast. Why is this happening? Because mortgages are having a hard time selling on the open market because we really don’t know what they are going to be worth.

Only time will tell what happens to the mortgage industry and with rates. If I had the answer for you, I would not be working…I would be on my yacht sipping martinis wearing a swimsuit…not a hazmat suit.

Let me know if you have any questions. Please stay safe & healthy.

 

Thanks for reading!

Carissa Abazia

@TheAbaziaGroup