If you do not understand Interest it is highly likely that you are paying a lot more than you should when you could be earning it.
Those that understand INTEREST, EARN IT and those that don't PAY IT!
Mortgage seekers and current Homeowners often look to their evening Television News for information on whether or nor Interest Rates are expected to rise. However, there are more accurate ways to predict the interest rate on Home Loans.
Did you know that when the Federal Reserve Board reduces the Fed Funds Rate, it does not reduce Mortgage Interest Rates? The Fed controls Short-Term Interest Rates, but it doesn't control Long-Term Rates. Long-term rates are the key to what lenders charge for Fixed Rate Mortgages. Most people assume that long and short-term rates move in tandem - but they do not. Often, when a change occurs in Short-Term Rates, Long-Term Rates and therefore Mortgage Rates will move in the opposite direction. A lot of PEOPLE get concerned when Interest Rates go up however Interest Rates are Relative.
Mortgage Rates are based on Mortgage Backed Securities and Mortgage Bonds (NOT 10 year Treasury Note). I have heard it over and over; people in the Financial Media presenting information on the Bond Markets continually make erroneous assumptions about the relationship of Mortgage Interest Rates with US Treasury Bond and Note prices. This happens because these Financial Reporters may understand the Bond Markets in general, But they are not Mortgage experts and do not fully understand how Mortgage Interest Rates are determined.
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For example, the Bond Market Reporters mistakenly tie Mortgage Rates to the performance of the US 10-year Treasury Note on a routine basis. You see this happen all the time. In reality, Mortgage Interest Rates and the intra-day re-pricing that occur are determined from the performance of Mortgage-Backed Securities (MBS or Mortgage Bonds), not US 10-year Treasury Notes.
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Interest Rates move every day and the reason that they do is because Mortgage Backed Securities are Traded Daily on a daily basis on the Chicago Board of Trade. Now when Mortgage Backed Securities are traded they move at accordance with other Economic Developments that are occurring. The Stock Market has a very Dynamic Relationship with the Trading of Mortgage Back Securities.
Typically, when Stocks are in fact Selling Off, Mortgage Back Securities Rally AND the same is true when Stocks are Rallying, Mortgage Back Securities are Selling Off because of the dynamic of the competition between Stocks and Bonds.
But also on a weekly and monthly basis we receive certain Economic Data that we know will have an impact on the Stock and Mortgage Backed Securities Markets.
The important reports that we assess and analysis as they come out each month are as follows: Initial Claims for Unemployment and the Unemployment Data at the beginning of each month. The First Friday of each month we receive the Unemployment Data for the previous month.
If Unemployment is UP typically what happens is we see a rally of Mortgage Back Securities. If Unemployment is DOWN this shows strength in the Economy, Mortgage Back Securities will tend to Sell OFF.
The Producer Price Index and Consumer Price Index Reports gage the potential for INFLATION. The Producer Price Index (PPI) is a measure of price changes in the manufacturing sector of the average price level for a fixed basket of capital and consumer goods paid by producers. It measures average changes in selling prices received by domestic producers in the Manufacturing, Mining, Agriculture, and Electric Utility Industries for their output.
AND, The Consumer Price Index (CPI) is a measure of the average price level paid by urban consumers (80% of population) for a fixed basket of goods and services. It reports price changes in over 200 categories. The CPI also includes various user fees and taxes directly associated with the prices of specific goods and services.
Other Data we keep a Close eye on is Retail Sales
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The Retail Sales Report is a measure of the total receipts of Retail Stores from samples representing all sizes and kinds of business in retail trade throughout the nation. It is the most timely indicator of broad consumer spending patterns and is adjusted for normal seasonal variation, holidays, and trading-day differences. Retail Sales include Durable and Non-durable Merchandise sold, and Services and Excise Taxes incidental to the sale of merchandise. Excluded are Sales Taxes collected directly from the Customer. It also excludes spending for Services, a large component of consumer expenditures. Retail Sales are the first picture of Consumer spending for a given month. The Potential Impact on Interest Rates is HIGH.
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Consumer Confidence Survey measures the level of confidence individual households have in the performance of the economy now and in the future. It is a leading indicator of future spending and the Business Cycle.
IF Consumer Confidence and Consumer Spending are Down this spells trouble for the future of the economy. And typically what will happen is that Mortgage Back Securities will Rally and Stocks will Sell OFF.
So it is really important that on a daily basis and on a weekly basis that we watch these Reports in an effort to get a SNAPSHOT of where Interest Rates will be heading over the next several weeks as it relates to Interest Rates.
The nice thing is that I have a very tight finger on the pulse of the Market and I often times know where Mortgage Rates are going even before the Development takes shape.
Beyond that I have a very close Relationship with the Head Mortgage Analyst for CNBC TV, who e-mails and corresponds with me 5 to 7 times a week on movements in Interest Rates. There is no need to be panicking based on daily headlines.
The purchase of a Home is usually the biggest investment you will ever have and it should be viewed as an investment, and this investment can assist you in all areas of your financial future. Before I can give you a Rate, I need to know more than 40 different things that are really critical for quoting rates. Not knowing these things and giving you a rate quote might cause you to miss out on a BETTER OVER ALL combination of Fees, Products and Costs.
Furthermore, there are TWO Types of Rates: "Quoted Rates" and "Real Rates" Which would you like? Would you like...The lowest "Quoted Rate"? OR...
The "REAL RATE" ...which is the OVER ALL COST OF BORROWING MONEY.
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The Rate is ONLY an estimate, of what your Rate could be. Until you have a property AND we LOCK Your Rate it CAN, and more than likely, WILL CHANGE.
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I must inform you that Interest Rates are relative.
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When Interest Rates are high, they are high for earning; when they are low, they are low for earning.
NOT knowing your Financial Options can COST you hundreds and even thousands of dollars. If you want a better loan than STOP SHOPPING RATE. Our incredible advice far exceeds our minimal professional fee and makes a difference in not just in reaching your goals, but beyond. It just makes good sense to look at all of your Financial Options, right?
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