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The stock market ran into some choppy seas last week and ended it with its worst weekly performance of the year. Meanwhile the mortgage backed securities (MBS) continued to enjoy smooth sailing. There was little reaction to news that stirred the equities market. Consumer Price Index (CPI) showed 1.9% yearly inflation which is right in line with the Fed’s target. This combined with moderate expectations for growth is providing fair winds for MBS to continue to enjoy a nice ride.

 

Mortgage rates are pretty much unchanged from a week ago.

 

The 10-year US Treasury Note is at 1.71%, unchanged since last time.

Credit Spread (10yr UST vs. FNMA Current Coupon) 1.31, from 1.37 last time. This is narrower than last week. It will be interesting to see if this is a trend that will continue.

 

Current 30-year Fixed 3.5%. Jumbo 5/1 ARM 2.25%.

Of note, the conforming 5/1 ARM is now at 2.25%, the 7/1 at 2.50%.

 

ARM’s

ARM rates continue to be very favorable. Unfortunately many shy away from them for the wrong reason. After the mortgage debacle of the last couple years many seem to think that ARM’s were at least a partial culprit. Nothing could be more wrong. As a matter of fact when you speak with most people who had financed with an ARM they tell you how nice it was to see the rate keep dropping without having  the expense of a refinance. I just did a comparison for one client this past week between a 30-yr fixed and a 7/1 ARM for a 330K loan. The savings over the first 7 years were $22,000 if using the 7/1 ARM. It is not right solution for everybody but with savings like that available it is definitely something more borrowers should have a closer look at.

 

I am always happy to help with any mortgage questions and/or pre-approvals.

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