LOW MORTGAGE RATES CONTINUE TO STIMULATE HOME SALES

Interest rates are the lowest they’ve been in months and the Federal Reserve is indicating these low rates will likely stay for quite some time. This news comes after the Federal Reserve maintained its position with interest rates and its bond-buying program.

The Federal Reserve has set a dual mandate to maintain price stability and promote maximum employment. In the July 28th Fed Monetary Policy Statement, the Fed said it needed to see substantial progress toward its two goals be- fore it can signal tapering bond purchases, which would ultimately hike mortgage rates. With more than 9 million jobs 􏰀􏰁􏰀􏰂􏰃􏰀􏰄􏰃􏰅positions to have the Fed change its current position.


High inflation would cause rates to go up. The Fed also addressed its position on high inflation in its statement. The Fed said that its definition of high inflation is something that remains “persistently high” for a “persistent” amount of time. And while the Fed said, “inflation has risen, largely reflecting transitory factors,” it will be several months before anyone knows if higher inflation is transitory.


In the meantime, the bond market doesn’t appear to be worried about inflation. The 10-year note yield hovers below 1.3%. The Fed will continue to buy bonds and boost markets, despite some economists saying the country doesn’t need it.


Home loan rates are determined by mortgage-backed securities. Current closed loans are being packaged in the Fannie Mae 30-year 2% coupon. As bond prices go higher, rates move lower and vice versa. The purple line in the chart below shows the 200-day moving average for Mortgage Backed Securities (MBS). MBS hit right at the 200-day moving average, which stopped the prices from moving higher. If prices remain beneath this blue line, home loan rates will remain at or lower than current levels. Should prices break the purple line, rates could move another leg lower.



The bottom line, for now, is that interest rates are at the best levels they’ve been since mid-February, making it a great time to secure a home loan.

RICHARD MANTYLA, NMLS #196418, is an experienced and knowledgeable mortgage loan originator (MLO) at Residential Mortgage. He’s worked as an MLO in Anchorage since 1984. He was one of Alaska Housing Finance Corporation’s top closing lenders in 2018, 2019 and 2020. RESIDENTIAL MORTGAGE, LLC | NMLS #167729 100 Calais Drive, Anchorage, AK 99503 (907) 222-8833

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