What Is The Deal With Mortgage Rates?

Who Can Figure From One Day To The Next If Rates Will Be Up Or Down?
October 30, 2008

If you have been tracking mortgage rates of late, you might feel a bit tuckered out. I am now referring to the latest turmoil in the markets as "Vuja De," which is the opposite of Deja Vu, meaning "we ain't never been here before." Our rates have gone up, down, then up back up again; often it all happens during the same day. Since February 6, 2008 we have seen mortgage rates more volatile than ever in the quarter century I have been tracking them.

However, in the last few months since the credit crunch hit, the volatility has gone through the layers of our ozone. During the past couple of weeks we have seen them hit their record high point for the year, then begun a nice downward spiral, then momentarily dropped to some very nice lows for hours or a couple of days at a time, then immediateley swung back to near record highs for 2008.
What is going on with mortgage rates?

Normally, in what used to be referred to as stable market times, mortgage rates would increase and decrease based on US Treasury sales, the mortgage backed securities market (MBS), the various economic reports of the day and the constant struggle to avoid the evil lurking in the shadows known as inflation. Real inflation decreases a bond’s yield, and thus any hint of inflation is going to bring down the value of a mortgage bond, which translates to an immediate increase to mortgage rates. In good times, when the economy is slowing down or showing signs of stability, this means that the yield is safe, so more investors purchase these securities and mortgage rates go down. That is how it works in what used to be called "normal times." I have found that the term "normal times" is a very relative term, as what we have experienced of late are not what I would like to call normal.

In times past, when all economic indicators pointed to a slowing economy, and US Treasury and bond yields were down, ordinarily mortgage rates would decrease immediately. That is not the case today. Most of the economic reports released lately show that our national economy is slowing down, which used to translate to a decrease to mortgage rates. But that hasn’t been the case. Oil prices have plummeted, gold has dropped somewhat and commodity prices have also decreased during the past few months. In normal times, this should have made mortgage rates decline, but they often did not decrease as one would expect. Our national unemployment continues going up as well as foreclosures. Home values in many parts of the country are down. This really should stimulate home buying in many sectors as it will bring balance to those markets, as they were highly inflated and will make housing affordable once again to those overated areas.

Here in Tulsa we have remained stable and it seems a shame we have had to pay the price due to the rest of the nations ill beggotten gains and greed. Yesterday the consumer confidence index slipped to a record low not seen in 41 years, and mortgage rates shot up. After the FOMC reduced the fed funding fee by 1/2%, mortgage rates again increased.

We should all be happy we are in Tulsa, knowing that our home prices are still appreciating and our local economy is still creating jobs and developing new areas that will bring new employment. The mortgage rates will decrease and faith will be restored to the markets. Remember that rates were normally at 9% before October, 2000 and we didn't see loans below 7.5% often until a tragic event in 2001. These national events will all pass and everyone should remain positive and stay in the home buying and selling mode.
Have a great day and please call me for any updates on rates or the economy. Stay optimistic and keep the faith.

Sincerely,

Jeff Sargent
President
ONB Bank & Trust Co
Residential Mortgage Division
8908 S Yale, Suite 250
Tulsa, OK 74137
Office: 918;392-6572
Cell: 918.636.0630
Fax: 918.392.6550
jeff_sargent@onbbank.com

Still Money to Lend

So call me!
BOk Mortgages Show Growth
TULSA-BOK Mortgage Group and its regional partners are bucking the national trend. BOK Financial said its Mortgage Groupl is well-funded and is looking for new business in all regional markets. The national mortgage market has declined to 25 percent this year, but BOK's has grown by more than 15 percent in 2008 compared to 2007.

Call me for a new mortgage or refinancing an exsisting one.

Karen Heston
Mortgage Banker
800-947-2655 x-7353
(918)488-7353
kheston@bokf.com