Hal's Mortgage Blog

Rates were on their way up, then a few weeks ago they inched back down. What’s going on?

As of today the overnight average is at 5.00 %. If you are interested in tracking this daily, go to my home page at www.HalTennant.com . The overnight average may include some points – usually about .6%.

The general rule of thumb says when the stocks go up, money flows out of bonds and into the Stock Market. This causes mortgage rates to rise. But the market has been going up for the last several months, why haven’t rates gone up?

The answer is Fed Chairman Ben Bernanke has been pumping $1.25 trillion into mortgage backed securities (bonds) in order to keep mortgage rates low. So, just when you think rates are going to start rising again, the Fed pumps some more money into the bond market.

The Fed was scheduled to wrap up this program by the end of the year but it now looks like the new cutoff date will be March 31, 2010. This means the same amount of money spread over a longer period of time. The result? Rates will creep up a bit.

When this artificial “Stimulus” ceases what will be the result? A quick run up of mortgage rates? Another slowdown in the Real Estate and Mortgage business?

That’s when I need that crystal ball.