Mortgage Rates are at their Lowest, Arguably

When talking about the "Lowest Rate Possible" a strong, two sided debate always takes place. We have heard this argument take place, many times both sides make equal and valid points to their case. Either way, Valley West Mortgage is here to tell you some of the details involved with the phrase "Lowest Rates Ever!".

Earlier this fall, the beginning of October and even the end of September, rates were on average lower then they are today. That being said, in terms of the actual interest rate that's most likely to be quoted to an ideal-scenario borrower, it was 3.875% then and after a long time stuck at 4%, the most prevalent best-execution rate is once again 3.875%.

There are a couple things to keep in mind when thinking about a 3.875% Best-Execution rate.. 3.875% Best-Execution rates mean that this the most prevalent RATE for the best of qualified scenarios, while it considers the costs involved to obtain that rate. Those costs can vary quite a bit before a move up to 4.0% or move down to 3.75% would be justified. We're only just entering the very outer limits of 3.875%'s range of closing costs (on average, some lenders are already close to 3.75, some are still at 4.0 or higher). The point I am trying to make here with this article on Lowest Mortgage Rates is that with all this hype and exposure of the term "LOWEST RATES POSSIBLE" in the market today, it is a good idea to step back and take a look around. It is very important to know all the details. You might have a better scenario then you imagine, leaving you with more options to help choose a company that can move down to 3.75%. It is not that the rates have not been here before, or that you have not been warned numerous times about subject similar to this one. The fact is that many first time home buyers have no idea what they are jumping into - (Not Factual).

Many first time home buyers read a Mortgage Blog, maybe even a book or watch a video and then make a few calls hoping to get some kind of valid information, possibly hearing some of the same terminology they just read about. Valley West Mortgage is dedicated to helping all of our potential home buyers find all of the information needed to make a smart decision with their future. See our past blog about Loan Officers Should Always Provide Valid Contact Information. Our staff at Valley West Mortgage can prove their Authenticity, as well as our companies, before talking number.

NewFed Programs Help Mortgage Rates

This week, the Fed announced new measures to boost the economy. This sounds amazing, and like everything else we have heard in the last two years. So expectations are pretty low for much economic growth to result from the measures taken by the fed. but they did help push mortgage rates to historic lows. The lowest rates we have scene in the last 3 years, not to mention that the rates are bordering on lowest rates we have seen in the last 45 years. You heard it here. We are almost at the lowest rates in history.

The Fed released its statement Wednesday afternoon. The MBS markets then staged a very strong rally for several reasons. The Fed confirmed that there are "significant downside risks" to the US economic outlook. Slower economic growth reduces inflationary pressures, which is favorable for mortgage rates. The Fed then announced the widely expected "Operation Twist program." A program that will extend the average maturity of the Fed's portfolio by purchasing $400+ billion of longer-term Treasury Securities and selling an equal amount of shorter-term Treasuries. The third major element from the statement helping mortgage rates was a surprise to most investors. The Fed will begin to reinvest principal payments from its mortgage-backed securities (MBS) holdings in additional agency MBS. Until now, the Fed has been reinvesting the MBS principal payments in Treasury securities.

With roughly $885 billion in MBS holdings in the Fed's portfolio, these principal payments, along with Operation Twist, will create a significant source of additional demand for MBS. The impact of the announcement was priced in very quickly. Although the Fed has not yet begun to purchase securities under the new programs, investors have already factored in the expected impact of the added demand on MBS prices. Following prior Fed announcements about purchasing MBS, nearly all of the benefit took place right away.