Curve

The Mortgage Rate Roller Coaster

Dan GreenThe Mortgage Reports Contributor

My longtime readers are familiar with the proverbial Mortgage Rate Roller Coaster. It’s my way of explaining how mortgage rates rarely move in a straight line.  Some days up, some days down — every day unpredictable.

This real, live Mortgage Rate Roller Coaster is 100% built-to-scale. It was originally constructed for a presentation at REtechSouth.

Mortgage Rates Can Make You Nauseous

In this true-to-life mapping, ride the coaster as it plots the Fannie Mae 5.0% bond against a wooden-frame rail track, beginning on November 25, 2008 and ending March 31, 2010.  This is the timespan during which the U.S. government spent $1.25 trillion to keep help mortgage rates low.

The Fed’s intervention worked, but left Wall Street on edge. During the program’s 4 months, conforming 30-year fixed rates varied by 1.75 percent and sometimes changed 5 times daily.

After A Period Of Calm, Rates Are Jumping Again

November 3, the Federal Reserve made another bond market commitment — this one for $600 billion. It was a move that Wall Street believes is inflationary in the long-term, but that the Fed deemed absolutely necessary to stave of deflation in the short-term.

Not surprisingly, mortgage rates are goofy again. The intervention is adding uncertainty.

Investors are dealing with inflation and deflation at the same time and, as a result, Mortgage Rate Velocity is up 33 percent in the last 30 days:

  • Average daily change Oct 3-Nov 2, 2010 : 24 basis points
  • Average daily change Nov 3-Dec 2, 2010 : 33 basis points

Lenders are routinely issuing 4 rates per day now.  The annual average is right around 2.

Rates Move In Real-Time So Get Real-Time Rate Quites

If you’re looking at mortgage rates and need to lock one in, . Include some bullet points on your current loan and I’ll get you active pricing right away. You can also use the “Live Rate Quotes” form at the top of the page.

I answer all my mail and look forward to helping you.