According to a panel of leading experts in the mortgage industry, over the next 30 days:

• 31% predict that rates will increase
• 31% predict that mortgage rates will decrease
• 38% predict that mortgage rates will remain unchanged

The question is then, what to do with this information? For some time, we have been encouraging our customers to lock their interest rate when they are comfortable with their proposed new payment, savings, etc.  In our many years of experience, we have determined that playing the market is not always the wisest thing to do.  Certainly, this strategy has paid off for some rate shoppers, but it is not foolproof.  We have seen many customers waiting for an .125% improvement to the rate, lose a .500%.  While rates may go down, how much lower do they need to go before we are  all satisfied?  Rates are at historic lows- today.

Everyone seems to be looking for a mortgage rate below 5.000%.  To put things in to perspective though, for every $100,000 that you borrow, 0.125% movement in either direction translates into a difference of $5.32 per month.  This means that on a $100,000 mortgage the difference between 5.000% and 4.875% is only $5.32 per month!  In this economy, we understand that saving money, however great or small is important.  However, we also understand that sometimes the desire for one interest rate over another is purely psychological- 4.875% sounds much better than 5.000% doesn’t it?

With the uncertainty in the market, we would strongly encourage our customers to consider their options today.  By locking in your rate, you will avoid the risks associated with this volatile market and you may save enough money to make it worth your while.  As always, please contact us at 866-676-3349 to discuss current rates and options for continuing the process.

The Federal Reserve Bank of New York began buying mortgage-backed securities (MBS) guaranteed by Fannie Mae and Freddie Mac today. The goal is to help capitalize financial institutions so they can begin lending again while also driving down the cost of borrowing to help stimulate the housing market.

The program, initially announced Nov. 25, allows the Fed to spend $500 billion to buy mortgage-backed securities guaranteed by mortgage giants Fannie Mae and Freddie Mac and another $100 billion to directly purchase mortgages held by Fannie, Freddie and the Federal Home Loan Banks.

Mortgage rates are dictated by the buying and selling of mortgage-backed securities. As demand increases for mortgage-backed securities, mortgage rates decline. Unfortunately, there has been little demand for mortgage-backed securities due to a lack of liquidity and concern over the quality of the loan pools and underlying collateral.

The Fed hopes to correct that by creating demand through it’s own purchasing of mortgage-backed securities. The holders of those securities will be able to reinvest the sale proceeds into additional lending. The new demand for mortgage-backed securities should also help to, at least temporarily, drive down mortgage rates.

Critics of the plan are concerned that this strategy does nothing to help distressed homeowners facing foreclosure. There are also concerns over how these newly capitalized institutions will spend the proceeds from selling the securities. Whether they choose to lend the money back to consumers or use it for other purposes is a concern for many.

Critics also point out that the “adverse market” adjustments Fannie Mae and Freddie Mac have implemented are keeping rates for most borrowers much higher than the market would suggest. Consumers currently looking to refinance their mortgage may be surprised to learn they no longer qualify for a mortgage or the rate they qualify for is much higher than the rates being quoted in the newspaper. Fannie Mae and Freddie Mac have had to institute “adverse market” adjustments to their pricing which penalize anyone that does not have pristine credit and substantial equity in their property.

About Author:

Chris Rocks is the Regional Director of the National Credit Federation (NCF), a consumer advocacy group that assists small business owners and consumers overcome debt and credit challenges. He can be contacted by visiting his personal site, GoodCreditLiving.com.

We are pleased to announce that ABBA First Mortgage, Inc. is now on Twitter.  You can visit our profile at Twitter.com/ABBAFirst.

Why?  This is just another way for you to keep tabs on what is happening in the mortgage industry and specifically at ABBA First Mortgage, Inc.  Like you, we are very busy and we understand that a visit to our website is not always convenient.  Have you ever found yourself wondering if rates are getting better without the time to do the research?  Follow us on Twitter and we’ll let you know.  Are they getting worse?  Is it time to lock?  We’ll let you know.

You can follow our “tweets” (this is what a Twitter update is called) right in the news section of our website or on your phone using a program like Twitterrific.   Please click here for instructions on how to set your phone up to receive our updates.

Your time is valuable and we hope that this is just another way to show you that we hold your needs in the highest regard.  We remain the best value in the mortgage industry and we look forward to helping you save money on your next loan.  Feel free to contact us today.