Interest Rate Update

The following are excerpts from the newsletter published by HSH Associates for the week ending 11/23/07:

“Flight-to-quality buys of US Treasuries are driving down underlying interest rates to multi-year lows, but you can’t tell that by looking at mortgage rates. Despite a 10-year Treasury flirting with a 4% yield this week, the average 30-year fixed rate mortgage (FRM) barely budged, rising one basis point (the last week) ”

“While Treasuries are benefiting from a wash of cash weary of uncertain stock markets (and certainly uninterested in mortgage investments at the moment), the spreads between such instruments have begun to widen anew. The generally “lockstep” influence that Treasuries have had for fixed mortgage rates broke back in late July, looked to be on the mend by September, and appears to have re-fractured. Spreads have ballooned to numbers even wider than those seen during the summer’s credit crunch, as mortgage rates have remained stable due to lack of investor demand despite strong downdrafts in short-term and longer-term interest rates.”

“With that as a backdrop, there should be no expectation that mortgage rates are poised to decline measurably anytime soon, but we may see a stable-to-gentle downward trend for rates as the holidays approach. “

Assuming a 1 point loan fee, conforming loans ( under $417,000) are at approx. 5.875%, while jumbo loans range about 6.9% to 7.0% . These quotes assume fully documented loans while stated income loans would be significantly higher.