EZ Mortgage Monitor - September 18, 2015 -

EZ Mortgage Monitor – September 18, 2015

Happy Post-Fed Friday!

If you weren’t paying attention, you may have missed it.

The policy statement of the FOMC really didn’t change at all from their July statement. But they did insert the following sentence: “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. Nonetheless, (and this part remained the same from the July meeting) the Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate.”

Yesterday’s market reaction was somewhat muted immediately following that statement and Fed Chair Janet Yellen’s press conference. Mortgage rates improved a sliver (not on the rate, but rather on the cost/credit), and then lenders removed some of that pricing improvement later in the afternoon.

This morning, the knee-jerk was a bit stronger. Stocks have been down fairly heavily with treasuries and mortgage backed securities rallying. Lenders opened with maybe 30-40 basis point pricing improvement to the cost/credit (not the interest rate) from yesterday’s close. It’s a nice little bonus, and a good day to lock if you’re positioned to do so, but…it’s also not a huge shift.

The bigger question is, what’s next?

Of course, nobody knows. We’re in uncharted territory, where history is not much of a guide – I’m reminded of the saying “past performance is not indicative of future results.”

I was looking at data comparing prior tightening cycles, and here’s what that shows:

With rare exception, like the span from 1954-57 and 1961-66 which were the longest and slowest policy tightening phases in history, each tightening cycle by the Fed has spanned a year or two, and covered anywhere from a 3- to 12-point increase during that cycle, with the average at roughly a 3% increases.

And, here’s what the Fed’s “dot plot” shows as their projection for the Federal Funds Rate:

So, they’re projecting a relatively moderate rate increase that may see them raise the Federal Funds Rate at lower increments, and further between each tightening move than we’ve seen in recent history.

We could in fact see an even more moderate tightening cycle than that. It seems that although they acknowledge things domestically are continuing to improve at a steady, albeit moderate, pace, they’re at least a little concerned that the US recovery could be derailed by global factors, and potentially even import deflationary pressures.

Some analysts think that’s a lark. They point to tight components within the labor force, where skilled workers are in high demand, able to quit one job and move to another, better paying job, with ease. They illustrate that the lower than historic labor participation rate may be driven by retiring baby boomers, more than those seeking work and not being able to find it.

The Federal Market Open Committee members may also be concerned that the EU and Chinese economies (among others) may pose a greater risk of stalling the US recovery than they’d previously thought, given the activity in both regions since this summer. That is a bit of a shift from what they had been saying previously. They’d previously acknowledged some of the problems abroad, but felt their impact upon the US economy would be relatively muted.

So, what does that mean for you?

Well, we “might” be in a lower rate environment for a bit longer, which is good for those who have the ability to get a fixed mortgage at today’s levels, still within about .5% of the historic floor set from roughly Oct. 2012 through May 2013.

For borrowers who have Adjustable Rate Mortgages (ARMs) that are going to end their fixed period in the near term, you’ll probably be protected from any significant payment increase (unless you’re going from interest only to a principal and interest payment). It may be worthwhile to ride that ARM for a bit longer, depending on your specific scenario.

And, for anyone who has an ARM with your first adjustment period a bit further out? If your ownership horizon is longer than your fixed interest rate period, it may make sense to evaluate your options for securing a longer-term fixed mortgage sooner, rather than later.

After all, just because we “might” be in a lower interest rate environment than we may currently think, that doesn’t mean we will be. We are, after all, in largely uncharted economic waters. And, if one thing is certain, it’s this: Interest rates will rise. We just don’t know when that will be.

As always, I’ll do my best to keep you posted on what direction rates are headed, and my take on why. In the meantime, here are your rates for this week.

Please don’t hesitate to call or email if you, your friends, clients, or family have questions about buying or refinancing residential or commercial real estate.



Conforming Rates Points APR Loan Amt Payment
30 yr fixed mortgage 3.750% 0 3.800% $     300,000.00 $         1,389
15 yr fixed mortgage 3.000% 0 3.050% $     300,000.00 $         2,072
3/1 ARM 3.000% 0 3.050% $     300,000.00 $         1,265
5/1 ARM 3.000% 0 3.050% $     300,000.00 $         1,265
Jumbo (ask me about Super Conforming limit, per your zip code)
30 yr fixed mortgage 4.250% 0 4.280% $     550,000.00 $         2,706
15 yr fixed mortgage 4.000% 0 4.030% $     550,000.00 $         4,068
3/1 ARM 3.625% 0 3.655% $     550,000.00 $         2,508
5/1 ARM 3.250% 0 3.280% $     550,000.00 $         2,394
Rates subject to change without notice.
Please keep in mind, these rates and statistics are for informational purposes only to give you a sense of market movement and my opinion as to why. Although these rates exist today, based on certain qualifying characteristics (760+ fico, owner occupied SFR with 75% loan to value ratio or less and $250,000+ loan amount), your scenario may allow for lower or higher interest rates.   Licensed by the CA Dept of Real Estate, #01760965. NMLS: 239756. Equal Opportunity Housing Lender. If you’d like to be removed from this list, please reply with REMOVE in the subject line.   You can also use this link, mailto:eric@ezmortgages.us and add REMOVE to the subject line. To add someone who would appreciate this information, send me their email with SUBSCRIBE as subject.


Eric Grathwol


EZ Mortgages, Inc.

4535 Missouri Flat Rd. Ste. 2E

Placerville, CA 95667

Office: 530-303-3643

Cell: 916-223-4235

Fax: 530-237-5800

NMLS: 239756



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