Thinking about getting a mortgage? You had better get started quickly.
"Homeowners have about a week before the next rush of refis begin," says Dan Green, a loan officer at Waterstone Mortgage in Cincinnati. "It's smart to be ahead of that rush."
The yields on Freddie Mac mortgage bonds and the 10-year Treasury tumbled after the Federal Reserve announced Operation Twist. The plan calls for the Fed to sell about $400 billion in short-term Treasuries and reinvest the money in long-term Treasuries. The Fed hopes the maneuver will push long-term interest rates lower than they already are. What the Fed hopes for isn't always what ends up happening. When the Fed implemented QE2, the second round of quantitative easing, the Fed hoped rates would fall but they rose instead.
Since the announcement, the yield on Freddie Mac bonds fell to 2.96 percent, as of Thursday afternoon, down from 3.52 Tuesday. The 10-year Treasury yield fell almost 20 basis points in the last two days. Mortgage rates often -- but not always -- follow the same direction as the Freddie and the Treasury yields.
So far, mortgage rates have not tumbled as much as those two benchmarks but they are dropping quickly.
Green says the rate on 30-year fixed mortgages had dropped about one-eighth of a percentage point since the Fed announcement, as of Thursday afternoon.
"It’s incredible to think rates on 30 year loans may be heading under 4 percent," says Rob Nunziata, president of FBC Mortgage in Orlando, Fla.
How long the party will last is anyone's guess. Some think there's not that much room for rates to keep falling, because they already are at record lows. But many experts I have spoken to think the rock-bottom rates may be here to stay. Others won't guess.
"It's too tough to tell about next week," Green says. "In volatile markets like these, next week is a lifetime away."
When in doubt, it's best to lock-in your rate so you don't miss the boat, Nunziata says.
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