Jeff’s Carlsbad Blog for First Time Home Buyers

Mortgage Updates (from a future guest blogger)

Posted in Financial,Mortgage info by Jeff Dowler on December 15, 2006

The following is, word for word, from a monthly update I get from a colleague in the mortgage business – Chris Comer at Pacific Capital Mortgage here in California. It’s worth a read (as always). Chris has a great site too – stop by and visit.

To All,

What I thought would be a pretty uneventful month heading into Christmas has turned out to be just the opposite.  Through the middle of last week, the 10 year bond yield was holding around 4.43%.  All economic data continued to point toward a slowdown and as such, there was much talk about the FED cutting rates sooner than later.  By around last Thursday, the bond market began positioning itself for the next FED meeting held last Tuesday.  Typically, as was the case, there is a sell off on bonds and the yields go higher right before the meeting.  Heading into Tuesday’s meeting the 10 year bond yield was up almost 10 basis points.  On Tuesday, the FED announced that they would leave rates alone and the bond market reacted favorably and yields dropped back into the 4.4% range.  However, on Wednesday the November retail sales report came in well above expectations and sent the bond market into a tailspin.  Higher sales can be an indicator of inflation.  Now the bond market felt that the chance of a rate cut by the FED is less likely to happen sooner than later.   This news helped to push the 10 year yield up to 4.6%.  Today’s consumer price index came in well below expectations helping to ease inflation fears.  By midday, we actually saw yields drop around 8 basis points.  However, by the end of today’s trading session, there were a lot of traders selling and taking profits which pushed the yield back up to 4.6%.  So in the last 10 days we’ve seen bond yields rise about 17 basis points and push mortgage rates up with them.

I think the overall consensus on Wall Street is that the economy is still strong but slowing.  With the slowing it’s pretty much certain that the FED will have to start lowering rates but the question now becomes when.  With the holiday shopping season in full swing, inflation reports over the next couple months can and will cause big swings in the bond market.  I can’t stress enough how good rates are right now and that playing the market to get an even lower rate could cost thousands over the life of a loan.  I just don’t see rates getting much better, if any, until the FED decides to lower rates and at this point picking that date is impossible. 

My opinion for the next month is that if you want to buy or refinance, now is the time to do it.  The opportunity cost of playing the mortgage market is not worth it right now.  I’ll say it again, RATES ARE PHENOMINAL!  Again, until the FED decides it’s time to lower rates, we’ll probably see bond yields hover in the 4.4% to 4.6% range with mortgage rates floating in a narrow range of +/- .25% on adjustable rates and +/- .125% on fixed rates.  Today’s rates are as low as 5.125% on a conforming 6 month ARM to 6.125% on a jumbo 30 year fixed.   If you’d like to follow the market daily, please visit my website at

Let’s get ready for a great 2007!!!

Chris Comer

Pacific Capital Mortgage



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