The weather may be getting cooler here in Florida, but the mortgage bond market and Florida Mortgage rates are feeling the heat and pressure on several fronts. I’ve provided you with some details below, and I hope they provide some clarity as to why it’s important to act soon to take advantage of current Florida mortgage rates - as we may be seeing the beginning of a sustained increase.
Glenn Frey tells it like it is in this “Heat is On” video.
Fear of Inflation Kicking Florida Mortgage Rates Higher
In the case of Florida mortgage rates, the heat is on due to signs from the national economy economy.
Numbers from the Core Consumer Price Index (CPI) came in higher than expected, indicating that we might be in for an increase in inflation. Why do we care? Well, remember that inflation is the enemy of low mortgage rates. It erodes the value of the fixed return that a Bond provides. When the value of mortgage bonds fades away, investors pull their money out of them, causing them to be less attractive as investments. End result… higher mortgage rates. In this scenario, even the slightest hint of inflation can cause Florida home loan rates to rise, which is what we saw last week.
Cash for Clunkers Program May Have Added Inflationary Pressure
When looking at these CPI numbers, it’s’ interesting to note the effect that the “Cash for Clunkers” program may have had on this index.
The Cash for Clunkers program was “creatively” accounted for as a reduction in the sales price of automobiles, which had to have a dramatic effect on lowering the CPI that was reported. Imagine how much higher CPI would have been had this “creativity” not been used. As even more inflationary fears creep into the economy, home loan rates will continue to rise.
Also adding pressure to Bonds and home loan rates is news that the Fed is at least considering a slow down in the rate at which it is purchasing Mortgage Backed Securities.
The Fed has purchased around $950B year-to-date out of the $1.25T allotted for the program, which is now set to expire March 31, 2010. This means the Fed will be averaging about $14B a week in purchases, a lot less than $25B or so they had been doing up until recently. And any time demand for an item slows down…including Mortgage Backed Securities…the price goes down. In this case, it means that Florida home loan rates will move higher.
The bottom line is that the heat is on…and all signs point to the fact that Florida mortgage rates will rising steadily from this point into the foreseeable future.
I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage loan originator, I’m your guy. Call me at 888-859-7418 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!
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Bad news for buyers.