interest rate

How The Recasting of Interest Only Loans Helps With Financial Planning

June 14, 2007

An interesting feature of interest only loans is that your payment is re-calculated each month based on how much money you are borrowing. The industry term for the re-calculation is “recasting”. When an extra principal payment is made on an interest only loan, the new loan payment is calculated as: (Outstanding Loan Size) * (Annual […]

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Proof That Mortgage Bonds Are A Global Market

June 12, 2007

If you ever wanted proof that mortgage rates react to global events, the past four days are it. Worldwide, investors are shunning the United States mortgage market in search of higher returns elsewhere. The more they sell, the worse mortgage rates get. The latest catalyst for extra supply: speculation about a Bank of Japan interest […]

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The Week In Review (June 11, 2007) : What To Watch For

June 11, 2007

After a semi-calm start, last week ended terribly for mortgage rate shoppers highlighted (lowlighted?) by Thursday’s mortgage bond market crash. The drubbing Thursday was the worst day for the bond market in three years and is one of the reasons why the conforming and jumbo 30-year fixed mortgage is up 0.625% since late-April. Conforming and […]

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Federal Reserve: Inflation Remains “Uncomfortably High”

May 31, 2007

Tomorrow, the fireworks begin.  Or, continue, depending on your point of view. After a span of several weeks in which mortgage rates have steadily increased, markets are gearing up for a heavy day of data that could confirm the worst fears of investors everywhere: the U.S. economy is not slowing down. The Fed’s May meeting […]

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How Lenders Protect Against Losses When Mortgage Markets Deteriorate

May 23, 2007

The graph at right shows the path of mortgage rates in May.  The rate run-up continued yesterday. After a fairly tame start, yesterday’s action rapidly slipped away from mortgage rate shoppers beginning at 12:00 P.M. ET. Many lenders responded by invoking their right to a mid-day reprice as well, with some adding as much as 0.25% […]

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When You Can’t Pay The Mortgage, Pick Up The Phone Pronto

May 15, 2007

According to RealtyTrac, one out of every 783 homes in the United States filed for foreclosure in April.  This is down one percent from March, but up 62 percent from one year ago. If you are struggling to pay your mortgage and have not yet entered foreclosure, the best thing to do is to call […]

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Today Is FOMC Day : What Will They Do/Say?

May 9, 2007

The Federal Open Market Committee meets today and markets will be hanging on their every word. There is virtually no chance that the Fed will change the Fed Funds Rate from its current 5.250% level, so its the Fed’s press release that will get all of the attention. We’ll disect the message in tomorrow’s blog […]

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Why “Prime Rate” Is A Name And Not A Number

May 2, 2007

Pop Quiz: Which interest rate is lower?  8.25% or Prime Rate? If you answered anything other than “they are the same”, then you can understand first-hand why banks refer to Prime Rate by name instead of by number. It’s a neat little piece of sales psychology that keeps people from recognizing their true cost of […]

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Until Bonds Get More Press, You’re Going To Have To Find An Advisor You Trust

April 13, 2007

Unlike the stock market, it’s hard for the average person to know when the bond market is getting turned upside-down. So, looking back at last Friday, when mortgage rates jumped very, very quickly in a short period of time, a lot of people got surprised (and burned). With stocks, we can all turn on CNBC, Bloomberg, […]

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Wealthy Americans Are 25% More Likely To Hold Mortgage Debt

April 11, 2007

Interesting fact of the day: 55.5% of “wealthy” Americans have mortgages on their primary homes vs. 44.6% of the overall population. This doesn’t mean that the wealthy are more indebted than the rest of us; it means that the wealthy are maximizing the tax deductions that the IRS makes available to every homeowner in the […]

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Would You Have Answered The Mortgage Type Quiz Correctly?

March 27, 2007

The pie chart at right comes from a Bankrate.com survey, sampling 1,000 adults about their current housing situation. The question asked: What type of mortgage do you currently have? While the 34% “Don’t Know” figure is troubling, even more frightening is the 6% “ARM” figure. The sample size was small, but far more than 6% […]

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The Fed Sets The Fed Funds Rate Sets Prime Rate

March 21, 2007

This afternoon, the Fed adjourns after a two-day meeting and it is widely expected that they will leave the Fed Funds Rate unchanged at 5.250%. So, what is the Fed Funds Rate and why does it matter to everyday people? The Fed Funds Rate matters to you and me because it is used to calculate […]

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Why Long-Term Mortgage Rates Are The Same As Short-Term Mortgage Rates

February 16, 2007

Interest rates are currently inverted, a market situation in which the longer you commit to lending your money, the less your return on investment.  It’s counter-intuitive so let’s delve a little deeper. Imagine if a friend asked you to borrow money for two years and you charged him interest on that money.  There are some […]

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It Was “Happy Holidays” for Retailers in December

January 12, 2007

For all of the talk about the slowdown in consumer spending, it appears that this Holiday Season was a winner.  This morning’s Retail Sales report doubled economists’ expectations by showing 1.0% growth. This is just one more inflationary pressure in the economy and makes it less likely that the Fed will lower the Fed Funds […]

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How the Unexpected Bank of England Rate Hike Can Impact U.S. Mortgage Rates

January 11, 2007

In a “surprise” move, The Bank of England raised its benchmark by 0.25% to 5.250%. Only one of 50 economists surveyed had predicted the increase and its unexpected nature played a key role in moving mortgage rates higher today on this side of the pond. The Bank of England is equivalent to our own Federal […]

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How Inverted Yield Curves Defy “Normal” Financial Behavior

January 8, 2007

Interest rates remain inverted, a market condition in which the longer you commit to lending your money, the less that you earn on your investment. Why is that a big deal? Imagine if a friend asked you to borrow money for two years you charged him interest on that money. We can list some of […]

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