What the Fed Says and What It Means

The Federal Reserve is not buying as many mortgage-bonds; however, that doesn’t mean that rates are going to go up. These are not simple times. The mortgage payment that comes with any home purchase is as unique as any home purchased.

It is an important time to have a relationship with your mortgage advisor; because the advisor you choose and the mortgage company that person works for can make a difference in your mortgage payment beyond the underlying interest rate. It’s important that an advisor can explain what really makes the difference in the choices you have.

There are two things that can have a major impact on the monthly amount a borrower pays as well as the overall amount paid on the loan. The first impact is the yield on the bonds that are packaged up for the mortgage investors. The second is the margin that mortgage investors can make on selling the bonds.

Those two things are currently keeping mortgage rates fairly steady. Freddie Mac’s weekly report showed that the average 30-year fixed mortgage rates were relatively unchanged from the start to the end of the third quarter, at around 3%. Fannie Mae economists are giving the same information that Freddie Mac is sharing that rates are predicted to stay at the same level through year-end.

The pandemic created a higher demand for mortgage companies and resulted in a hiring frenzy for many companies to be able to respond to the mortgage loan rush. There is a lot to know about the marketplace when it comes to buying a home. Knowing what it means to work with the various offerings can be helped by having a trusted advisor. I have a list of answers that further explain how working with a local advisor can help simplify life and mean having a monthly payment that you can fully appreciate.

As a lender, Finance of America is watching the interest rates and carefully utilizing the elimination of fees recently processed by the Federal Housing Finance Agency to help give better options to those seeking to buy a home. There is concern within the industry that some lenders may use the opportunity to increase their own margins. Thus, working with an advisor who can explain terms plainly and who has a stake in the community may be in your best interest.

You should know that there is also a new product that banks are utilizing to spread out the risk of borrower’s defaulting on mortgages called transfer securities. Some of these new products bring back memories of the financial products that existed before the 2009 financial meltdown. Many investors in the market believe that niche mortgage products are supported by a surging housing market and improved borrowers’ credit quality.

There is one wild card that no one really knows how to play right now and that card is if home prices keep going up, the Fed may rethink how aggressive it gets in responding to rising asset prices. High pricing may create a greater supply of houses, but if that doesn’t happen that way, the Fed may begin bond selling and mortgage rates may go up.

At Finance of America we are seeing those who are seeking homeownership finding better products through Finance of America, because of the many options available today. Know your options. Know your lending opportunities. Know the resources within your community.

Be sure to find a licensed advisor that you know serves your best interests, your community, and has history in the community as well as will be there for you for the duration. Call 360-607-9312 or email MPattullo@FinanceOfAmerica.com for help preparing your credit application to best evaluate your mortgage options. We are your local advisor.

We lend where we live,
Mike