St. Louis Real Estate - Mortgage News - Lock it and Pocket the Money

Flight to Safety? by Chris Scheer, Branch Manager, Cornerstone Mortgage, O’Fallon, MO

What a 24 hour period on the bond for the mortgage backed securities. Several Days ago the bond market was whipsawed by the statements made by Senator Schumer. During the next 3 hours interest rates on the 30 year fixed fell to 6% and depending upon the loan size some loans were locked at 5.875%. This knee jerk reaction is what Wall Street likes to call a “Flight to Safety.” When there is panic in the markets, safe money is parked short term in bonds and so as the money fled from stocks, it went into bonds and we saw the prices rise and the yields (interest rate) fall. As with any sharp movement like this the following day you can expect a correction to occur or in some cases simple profit taking. The next day began that way as demand dropped and rates started to rise and then Citi announced their cash infusion and the correction continued throughout the day.

As I just checked the price on my sheets, the same loan that I locked yesterday at 4:00 c.s.t. I am now able to lock and I have lost 45 basis points or almost .5%; which to the consumer usually means the difference in .125% in their rate. So over 24 hours we have seen rates fall .25%-.375% and then rise .125%-.25%.

Lock_in What does this mean? If you are one of my clients, it means the next time I call you or send you an e-mail that says it is time to take advantage of a market movement, heading my advice will make you money. If you are not one of my clients, then when you talk to a loan officer and he tells you that his rate is x and you don’t pull the trigger and lock in, he just might be telling you the truth if you talk to him 2 hours later and he says his rate is now x+y or in other words higher.

Cscheer For questions about this or comments, please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, St+Louis+Mortgage

This entry was posted on Saturday, December 1st, 2007 at 11:07 am and is filed under First Time Home Buyer, For Buyers, Mortgage News, Relocation Buyer. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.