Why Mortgage Rates Just Went Up!

Check out this info from our good friends at New Garden Mortgage:

As you might know, I've been lamenting lately about the wild swings in mortgage interest rates and the difference between where rates SHOULD be and where they REALLY are.

Some of the problems are tied directly to the fact that with so many homes across the country empty or in foreclosure - and so many borrowers delinquent on mortgages - mortgage backed securities are NOT SEEN as the "safe haven" they were for the last 15 years.

Every few weeks the treasury department auctions US Treasuries to fund government debt. The treasury bonds are generally purchased by large funds wanting to have a balanced weight in their portfolios (your 401Ks and IRS accounts). This afternoon the Treasury held an auction for 30 year treasury bonds, and were surprised that there were virtually no bidders. It was the worst auction results EVER for the treasury department with 90% of the bonds purchased by dealers not funds managers. This gives the government very little options as they will obviously have difficulty issuing additional bonds to cover the new $600 per person bail out stimulus plan being debated in the Senate.

The "no bid" on 30 year treasury bonds sent the rates on 10 year treasuries sky rocketing. We are interested in this because mortgage interest rates generally follow the lead of the 10 year treasuries... All of this just reinforces the fact that the FED has no control over long term rates. They can cut the short term rates down to 1.5% - but if no one is lending money it doesn't really matter.

Bottom line, the FED and Congress are in a pickle... and rates continue to be VERY volatile!

If you know someone in need of educated mortgage options - please give them our name!

Steve and Eleanor Thorne
New Garden Mortgage
919-649-5058