Q & A with Axiom Financial

Representatives of Coldwell Banker Residential Brokerage recently spoke with Melissa Wright, the President of Axiom Financial to discuss the recent fluctuations with interest rates and what this might mean for today’s buyer.

Q. What has happened with interest rates in the last month?

A. “In the last month we’ve seen rates go up as high as a full percent, then come down .50%. They’ve fluctuated dramatically over the past month, however, we are still near a 38 year low.”

Q. We are in the middle of a recession. Why is the Federal Reserve raising rates?

A. “Actually, The Federal Reserve isn’t raising rates. What has happened is Wall Street is concerned about the trillions of dollars being injected into the US economy via the Economic Stimulus Plan. They believe it will eventually lead to an improving economy, however, they also fear it will lead to inflation. Wall Street is always looking three to six months in the future in order to hedge its bets on a variety of investments, stocks, bonds, etc.
“About one month ago, many on Wall Street became convinced that we were going to recover from the recession later this year. They were seeing ‘Green Shoots’ of economic recovery everywhere they looked. As a result of that expectation, the stock market rallied, and the bond market sold off at a record pace. Mortgage bonds are the prime mover on mortgage rates. Rates shot up 1.0% in three weeks.
“Wall Street changes its theories on our economic future practically at the drop of a hat. Over the past week or so, Wall Street has decided that the recession is more severe than they had previously thought. Now they have concluded that we will not experience an economic recovery this year. As a result of this, the stock market sold off, and the bond market rallied. This dynamic action pushed rates lower. Rates have come back down approximately .50% from the 1.0% increase we previously had last month.”

Q. There are a lot of homeowners out there who may not currently be in trouble on their home mortgage but they would still like to refinance. What do you recommend for those individuals whose loan to value ratio has been compromised due to the current recession and/or they are nearing the end of their Adjustable Rate Mortgage (ARM)?

A. “Due to Obama’s Foreclosure Prevention’ plan, those individuals who have a Fannie Mae or Freddie Mac loan may be in a good position to refinance now. Both Fannie Mae and Freddie Mac have created some refinance options for their mortgage holders, even if they have zero equity remaining in their property. In some cases, leniency on credit and income may be considered for those that qualify for these exceptional programs.
“The real challenge is for those mortgage holders who have Jumbo loans. There are no government loan programs that help these people get leniency on refinancing if they lack sufficient equity, income or credit. The only option for these individuals is to contact their loan servicer directly to discuss a loan modification.”

Q. What message would you like to send to potential buyers?

A. “Now may be a great time to buy. Homes have depreciated significantly in some parts of Utah. It’s the biggest correction in home values in modern history.
“With current 30 year loan rates in the 5.0% to 5.50% range, these rates are still historically low. The combination of low interest rates and lower home prices indicates that this may be a good time to buy, especially for first time home buyers who may qualify for an $8,000.00 tax credit that has limited availability in 2009.
“If you are ready to buy a home, please contact an Axiom Financial Loan Officer to get properly pre approved to purchase a home. We do expect to see continued volatility in interest rates for the rest of this year. It would be wise to lock your rate in when you get an accepted offer on a property. This will protect you from the rate possibly rising as your transaction goes through the 30-45 day escrow process. In this current market, you might get a .125% fluctuation in interest rates on any given day. This is due to the daily economic news that ends up influencing the stock and bond markets. This is what moves mortgage rates up and down. The bottom line is there is more upward pressure on rates than there is downward pressure right now.”

For additional answers, please contact:

Casey Bauer
Axiom Financial
801-550-6120
casey@axiomfinancial.com