Mortgage rates have dropped–but why aren’t they dropping more?
This has been bugging senior loan consultant Dick Lepre of Residential Pacific Mortgage, who writes a weekly newsletter about the home loan business. He notes that the Fed is making “an absolutely massive intervention,” injecting more than a trillion bucks into the system by buying up mortgages and Treasuries.
That’s certainly driven down both Treasury yields and mortgage rates, but LePre thinks rates should have fallen farther. Part of the problem is that there are fewer lenders left to compete for your business, but lower wholesale prices for mortgage debt should be leading to lower rates than we’re seeing, he says:
(W)hat stinks is that banks have simply pocketed the extra profits rather than pass them along to borrowers. It may well be the case that the Fed is tolerating this so that banks can make money and improved their seriously damaged balance sheets.
This last thing will go on until 1) it is publicized enough to get AIG-like indignation or 2) one big commercial bank breaks out and start pricing to gain market share.
If you’re in the market for a mortgage or a refinance, you’ll want to read Ron Lieber’s excellent piece about mortgage brokers. It includes a tutorial on how to seek out the best rate, including suggestions that you do all your rate-shopping in one marathon day (so you’re comparing apples to apples) and that you call credit unions, your investment firm and your current lender (if you have one).
For more about mortgages, read:
Social poster
Downloads
- No documents for download.
