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30 Year Fixed Rate Mortgage Plumbs Fresh Record Lows As Mortgage Market Anticipates New QE

Tyler Durden's picture


The 30 year Freddie Fixed Rate Mortgage has just printed on the south side of 4.50%, at 4.49%: a fresh new all time record. The spread to the 10 year Bond (which, yes, is tighter once again, flirting as usual with the 2.9% barrier), is about 158 bps. Of course, should the Fed recommence QE, which is now just a matter of politically self-destructive time, the spread will collapse, the 10 Year will plunge, and the administration will bankrupt all mortgage lenders (who are idiotic enough not to have been subsumed by the bankrupt GSE Borg) who will soon be forced to lend a 30 year mortgage at something around 3%. Alas, by the time the administration realizes that it does not matter what rate the mortgage is, and that the security of having a 1) cash flow and 2) job is far more important, and still as missing as always, it will be too late.


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Thu, 08/05/2010 - 10:44 | Link to Comment pan-the-ist
pan-the-ist's picture

Do I wait for QE before I refi or should I jump on these rates now?

Thu, 08/05/2010 - 11:46 | Link to Comment Village Idiot
Village Idiot's picture

In the business - refi now at historically rates, but, pay no points!  Your hard costs shouldn't exceed 3k (based on loan amount) and if the bottom falls out on rates, do it again.  3K is cheap insurance, and, you can start to save (recoup costs) in the meantime.  Unless this was a rhetorical question - in which case, never mind.

Thu, 08/05/2010 - 13:39 | Link to Comment pan-the-ist
pan-the-ist's picture

It was not retorical.  How do I go about not paying any points?

Thu, 08/05/2010 - 15:07 | Link to Comment mnevins2
mnevins2's picture

I'm a mortgage broker and work exclusively with "no cost" mortgages. Depending upon your loan size, you can increase your rate by 1/8th - 1/4 and have the higher payback to the lender absorb your closing costs.  Questions?

Fri, 08/06/2010 - 10:58 | Link to Comment derekste
derekste's picture

refi'd my 30 year FHA that I've had for 18 months from 5.0 to 4.375... streamline refi, no points, broker is paying closing costs(all the ones he can legally pay), and I'm financing the up-front MIP.

How'd I do?

Thu, 08/05/2010 - 10:46 | Link to Comment SteveNYC
SteveNYC's picture

What, you mean there is NO DEMAND for credit??


But....but......Obama, Bush, Geithner, Summers, Bernanke et al. told me that they NEEDED to get credit FLOWING again!! That there was NOT ENOUGH credit being made available!

These guys wouldn't lie to me would they???

Thu, 08/05/2010 - 11:16 | Link to Comment lizzy36
lizzy36's picture

When the "smartest men in the room" (the pencil dick and his fat ass side kick) incorrectly label a a solvency crisis a liquidity crisis , de facto, they are lying. 

Thu, 08/05/2010 - 11:30 | Link to Comment SteveNYC
SteveNYC's picture

The "side kick" should be force-fed Diet Coke a la the Brad Pitt movie "Seven", when the "glutton" gets his treatment.

Thu, 08/05/2010 - 12:25 | Link to Comment Spigot
Spigot's picture

There is demand but they do not qualify. The pool of qualified borrows shrunk to a puddle. But really, rates are relative to the 10 yr, and pretty much will follow it down to zero + conceirge charges.

Thu, 08/05/2010 - 10:47 | Link to Comment hellboy
hellboy's picture

David Rosenberg's newest:

What passes as normal? Well, today, that is an interesting question.

Just reading the newspapers from the past few days, does More Workers Face Pay Cuts, Not Furloughs (New York Times) get you all hot and heavy over a new cyclical bull market? How about Tech Gadgets Steal Sales From Appliances, Clothing (Wall Street Journal) — hey, who cares if the spin cycle on the washer-dryer don’t work no more, I got me an iPad! Amazing.

Meanwhile, there is excitement in the air over the view that all we have on our hands is a pause that refreshes. Interesting, however, as to how the bond market isn’t buying it, and why should it when MasterCard processed transactions are flat from where they were a year ago.

Nothing we are seeing in a post-bubble credit collapse is normal. 

Thu, 08/05/2010 - 11:13 | Link to Comment -Michelle-
-Michelle-'s picture

I saw that WSJ headline this morning and got a nice chuckle.  We're coming up on five years in this house.  In the past month, we've had to:

Renew our termite bond: $900
Major service on our A/C units: $600
Increase our attic insulation and put in attic fans: $3060
Replace our fridge (bought new for this house): $1300

No iPads here.  I have wondered if other people who bought around the same time we did are going through the same maintenance issues right now.  It seems like we've been getting some deals cut here and there.  When the pest control company called to up the bond, they offered a discount almost immediately.  The A/C people came out the same day I called and offered a discount.  The insulation estimate was done the same day, install was completed after only two days, and they knocked off the price on the fans and made sure to direct us toward info on filing for the federal tax credit.  Even the fridge got a 10% discount immediately offered when we told the floor rep that we wanted to purchase that day and with cash.

Thu, 08/05/2010 - 18:49 | Link to Comment ZeroPower
ZeroPower's picture

Nice work on paying cash - which i expect about 10% of the population do so (mostly seniors who 'hate' plastic).

Cash is typically great for making deals. Whether 'with a receipt' or not, paying in dollars always gives me some sort of give when i try and bargain with people. When i ran a contracting business a few years back, i never implicitly asked for cash in my deals but whenever it was offered (rather, suggested) i always happily agreed in exchange for a few points off the top.

As for wait times, i suppose demand is down (thanks to do-it-yourselfers i assume). On the other side of the border, we're very slightly seeing things here slowing down, but not enough to say the correction has reached us yet. The smart ones will be ready when it does. 

Thu, 08/05/2010 - 10:48 | Link to Comment Sancho Ponzi
Sancho Ponzi's picture

OT: What's up with UNG?

Thu, 08/05/2010 - 10:56 | Link to Comment Ragnarok
Thu, 08/05/2010 - 10:50 | Link to Comment No Mas
No Mas's picture

"Alas, by the time the administration realizes that it does not matter what rate the mortgage is, and that the security of having a 1) cash flow and 2) job is far more important, and still as missing as always, it will be too late."

Too late for what or whom?  Are you talking of political fortunes here?

Is it feasible to believe we can have a material decline in any major index within the next 10 years?  5 years?  It would appear that with the market disconnected from any measure of the US economic performance (well documented by ZH), the only thing that could cause a major drop would be a decision by the Federal Reserve to make it happen?  Can anyone see a scenario where they would allow that result? 

Thu, 08/05/2010 - 12:07 | Link to Comment ElvisDog
ElvisDog's picture

Your premise assumes that the Fed is ominpotent and can always achieve its desired result. You have to remember that the Fed is not a government agency but a collection of privately-held banks. Look back in history to the George Soros - Bank of England confrontation. Bank of England would be equivalent to the Fed. By your argument, market forces could never overwhelm the mighty Bank of England. Don't fight the BoE. But that didn't work out so well, did it? The Fed's power is largely based on your attitude - that they will "print money" and "they won't cause the markets to drop". I don't believe they are omnipotent at all.

Thu, 08/05/2010 - 10:57 | Link to Comment NoBull1994
NoBull1994's picture

It is only a matter of time until the Gov't declares that all defaults - mortgages, credit cards, personal loans, etc. - that occurred between 2007 and 2010 are now null and void, and that credit bureaus and lenders are forbidden from docking the credit scores of borrowers who surely defaulted through no fault of their own.... 

Thu, 08/05/2010 - 11:02 | Link to Comment Boilermaker
Boilermaker's picture

LOL, I think you forgot the 'sweeping reform' to personal bankruptcy law in 2005 just prior to the shit hitting the fan.  They knew this shit storm was coming.  They aren't letting people off the hook, they are going to fucking enslave them.  Watch.

Thu, 08/05/2010 - 11:45 | Link to Comment tmosley
tmosley's picture

Same thing.

"Freedom is slavery"

Thu, 08/05/2010 - 11:55 | Link to Comment MachoMan
MachoMan's picture

freedom doesn't have to be slavery, if one is disciplined enough...

Thu, 08/05/2010 - 11:31 | Link to Comment SteveNYC
SteveNYC's picture

The funny thing is, in 10 years the "prudent" that have no debt to "forgive" at the time of forgiveness, and the irresponsible who are indebted to their fuckin eyeballs, will be in the exact same positions.

Thu, 08/05/2010 - 11:52 | Link to Comment MachoMan
MachoMan's picture

Don't worry, we'll be having the same conversation again with them soon enough...  somehow, even though we'll all be destitute, some of those fucking idiots will still figure out how to squander their reserves or ensure they will have none (what's the slave equivalent of an ipad?  a sugar cookie?  fuck, they still might be trying to get ipads...).

Thu, 08/05/2010 - 10:58 | Link to Comment americanspirit
americanspirit's picture

Perhaps events will move past the point where they can 'allow' or 'disallow' anything, regardless of how much increasingly worthless paper they print. At some point mob mentality or panic may just prevail over calculations made in those cool glass offices above it all. Remember 'L'etat - c'est moi". That same laissez faire mentality has brought down empires before, and it will again this time.

Thu, 08/05/2010 - 11:03 | Link to Comment Ragnarok
Ragnarok's picture

'L'etat - c'est moi" is the opposite of "Laissez faire".

Thu, 08/05/2010 - 11:19 | Link to Comment -Michelle-
-Michelle-'s picture

I'm thinking more along the lines of "apres moi, le deluge."

Thu, 08/05/2010 - 11:41 | Link to Comment jakeman
jakeman's picture

Actually, I'm thinking they're telling us, "Vas te faire foutre." (Or whatever the plural of that phrase is...)


Thu, 08/05/2010 - 11:54 | Link to Comment -Michelle-
-Michelle-'s picture

The sentiment is about the same, I suppose.

Thu, 08/05/2010 - 11:09 | Link to Comment hamurobby
hamurobby's picture

So how about this. I get a reasonable mortgage and sit on the cash and wait for a liquidity crisis. If said crisis does not come just pay back the loan, no problem. If it comes, buy gold on the cheap and then make my payments until we reach a tipping point to major inflation, liquidate ()% of gold then pay back loan. The other benefit to this is Im not sitting on a house that maybe a liability if I must retreat to my trailer in the woods one day (the house value is then liquid to me if its financed and I have to vacate). Besides the cost of origination and interest, any other pitfalls anyone sees in this scenario?

Of course we could all get lucky and gold would never go up in value, and I can keep my job and everything will be great, I can live with that (loss).

Thu, 08/05/2010 - 11:14 | Link to Comment starfish
starfish's picture

You could get a 7/1 ARM at 3.25-3.5 with 0 closing costs...7 years should be enough for that scenario to play out.

Thu, 08/05/2010 - 12:01 | Link to Comment WaterWings
WaterWings's picture

Of course we could all get lucky and gold would never go up in value, and I can keep my job and everything will be great, I can live with that (loss).

Exactly. Which is why most people I know think they can ignore the math and everything will be okay. They fight the very idea that there is a real decline in quality of life, that it is permanent, and that it will continue to deteriorate. As Michele added above: "Apres moi, le deluge." Everyone else will get screwed but not me, I got mine.

It's a tsunami. Previous paradigms no longer apply.

Teevee, junkfood-addled Amerika could not withstand a currency collapse. The Black Plague made human capital valuable again - in modern application we have tens of millions on the gov't teat with no recovery.

All those 99-weekers waiting for jobs. What jobs? Doing what? The service economy is a fiat lie and our infrastructure is based on a constant flow of cheap oil.

Mortgage? WTF for? Prices are artificially high because of 1) shadow inventory 2) who can say they will be employed in their profession to make payments for 30 years anymore - no man is an island.

Stay nimble. Stay quick. This is no time for white picket fences. Going back to the sad, miserable, drugged-up state of our Nation it ain't a stretch to imagine that the Mandarin speakers are planning to make use of their raw (war) materials and spouse-less young men for "real estate acquisition". Hasn't anyone read a history book around here? The Chi-Coms have openly spoken of how they deserve North America. This kind of scenario isn't discussed because it is the worst-case scenario outside of nuc-bio-chem warfare, and then subsequent invasion.

"Oh, but China needs us and we need them." Bullshit. Everyone is buying time. The Chinese aren't stupid and they know they aren't getting their money back. Some finance guy over there said US bonds are not safe medium and long. In other words "We are trying to buy as much time as possible to acquire tangible assets that matter!"

All the survivalists from the 70's were wrong because they didn't understand the "Nixon" trick/effect of taking us off the gold standard and taking paper money to its extreme utility. It would have been better to face this shitstorm back then. Back when Americans were still eating meals that had real nutrition, no obesity epidemic, actual human interaction, strong infrastructure with less bureaucracy. Today it's all bloated beyond recognition.

When the Fed finally makes a move that has a visible and real effect on Amerika even rationing of supplies won't keep the interurban areas content. We are at the brink of a f.u.n.d.a.m.e.n.t.a.l. shift. Be far away from the millions that require a weekly check for their very survival. Do you think the owners of the Fed care if millions starve?

Thu, 08/05/2010 - 18:31 | Link to Comment 1100-TACTICAL-12
1100-TACTICAL-12's picture

Could not have said it better.

Thu, 08/05/2010 - 22:47 | Link to Comment hamurobby
hamurobby's picture

Thanks for the input, I know better, but sometimes you just have to hear it from someone else. I also got an ear full from my best friend this afternoon about this, so we are out of here. I have a few days of minor repairs to do to this house, and its on the market. I will get to shoot my hbars in the yard again, I miss that bad.

Thu, 08/05/2010 - 11:04 | Link to Comment Boilermaker
Boilermaker's picture

People don't buy fucking houses when the prices are falling, foreclosures are all over the place for all to see, and you either don't have a job or don't know if you'll have a job tomorrow.

How the fuck is that difficult to understand?  Interest rate...Jesus f'ing Christ, who gives a shit?

Thu, 08/05/2010 - 11:05 | Link to Comment dan22
dan22's picture

The Terrifying Protest of China's Poor- The Kindergarten Massacres

Yesterday a man wielding a knife killed three children at a kindergarten in eastern China's Shandong province, the latest in a string of attacks that has shocked parents and has forced government leaders to focus on the underlying causes of the violence.  Police have detained a 26-year-old man, Fang Jiantang, who admitted to killing the children, state-run Xinhua news agency said Wednesday. Xinhua described the man as self-employed. There was no immediate word on what motivated his murderous rampage.

The three children died at the school, and three other children, along with four teachers, were taken to a hospital, Xinhua said. The attack occurred in Zibo, a manufacturing city with a population of more than four million. The assault took place Tuesday afternoon, but Xinhua didn't issue a report until a day later. 

The Terrifying Protest of China's Poor- The Kindergarten Massacres 

Thu, 08/05/2010 - 11:34 | Link to Comment SteveNYC
SteveNYC's picture

RIP poor children.

Thu, 08/05/2010 - 12:07 | Link to Comment Village Idiot
Village Idiot's picture

"RIP poor children."


RIP poor children, grandchildren, great grandchildren, great great grandchildren.  F&*k me!


EDIT: just saw the RIP, without any reference.  I am referring to our children - unfortunately.

Thu, 08/05/2010 - 11:06 | Link to Comment joepast
joepast's picture

fannie and freddie to the rescue.. underwater property homeowners to get a huge "QE" gift from the bogus gov. via reducing loan amts on underwater mort .. is this so ???????? an august pre elections gift for dems ...

Thu, 08/05/2010 - 11:19 | Link to Comment Rainman
Rainman's picture

It's still a rumor, probably to test the outrage first. One in five are underwater to the tune of $ 800 billion now. That said, the Critters will be more dangerous than ever for the next 3 months.

Thu, 08/05/2010 - 12:15 | Link to Comment ElvisDog
ElvisDog's picture

Riddle me this: will the millions currently living in their homes and haven't paid their mortgages for many months suddenly go back to paying their mortgages if their interest rates are reduced or some fraction of their principal has been reduced? I think not.

Thu, 08/05/2010 - 11:06 | Link to Comment Gimp
Gimp's picture

I know we all need money but can ZH get rid of the "Profit with Cramer" pop-up ad with is ugly mug on it. I think the title is an oxymoron.

Thu, 08/05/2010 - 11:49 | Link to Comment tmosley
tmosley's picture

I think it's hilarious that Cramer is paying for a portion of this website.

Thu, 08/05/2010 - 11:10 | Link to Comment Gimp
Gimp's picture

RE market is still dead. I have been trying to sell a piece of property for the past 18 months in a great location, with limited supply, price is 60% below the price two years ago and still no offers. Place is spotless and well maintained. People ain't pulling the trigger.

Thu, 08/05/2010 - 14:06 | Link to Comment badameli
badameli's picture

What location? Photos? and price?

Thu, 08/05/2010 - 18:53 | Link to Comment ZeroPower
ZeroPower's picture


If youre going to post an anecdote at least give us some info...

Thu, 08/05/2010 - 11:10 | Link to Comment Kreditanstalt
Kreditanstalt's picture

Do we have to pay this with REAL saved-up money or can we use that funny "credit" or "debt" kind?

Thu, 08/05/2010 - 11:11 | Link to Comment Rockfish
Thu, 08/05/2010 - 11:11 | Link to Comment solgundy
solgundy's picture

Obama may be about to order Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) to forgive a portion of the mortgage debt of Americans who owe more than their homes are worth. The potential move is seen as a last-gasp effort to save the Obama agenda; the political calculation is that the number of grateful Americans would outnumber those offended that they would be paying for someone else’s mistakes.

Thu, 08/05/2010 - 11:49 | Link to Comment Village Idiot
Village Idiot's picture

count me as one of the offended.

Thu, 08/05/2010 - 12:19 | Link to Comment spyware-free
spyware-free's picture

Me too. Fuck this social experiment called big government. Being responsible for one's self has become a fool's errand.

Thu, 08/05/2010 - 12:17 | Link to Comment ElvisDog
ElvisDog's picture

I have to agree. It would be a zero-sum-gain politically at best. And the outraged are probably more likely to vote in the coming elections.

Thu, 08/05/2010 - 21:20 | Link to Comment StychoKiller
StychoKiller's picture

Obamatron is just gonna pour MORE gasoline on the fire -- count me offended!

Thu, 08/05/2010 - 11:15 | Link to Comment Misean
Misean's picture

As with every trade there is a buyer and seller.  The Feral can "price fix" a lower price, but that just means supply is withdrawn.  More important, I'm getting anecdotal evidence that the "cash flow--I can make the payment" mentality that has been the prevailing "home economics" paradigm for 30ish years is passing quickly...

Thu, 08/05/2010 - 20:21 | Link to Comment Miles Kendig
Miles Kendig's picture

Looks like a sub 4% 15yr FNM/FRE print by Columbus Day may be money good.

Jobs & cash flow Tyler?  ROFLMAO  The only things that matter are a green arrow on stocks and that everyone else SPENDS.  Actually paying back a loan or being expected to do so no longer applies.  One thing is certain.  Paul Krugman's quip about needing new worlds to ship goods to so everyone can enjoy an export led recovery has been answered in the same old way.  Since America is the new world this heavy burden of producing nothing but worthless bits of paper to exchange for these goods must fall to the US. 

Thu, 08/05/2010 - 11:24 | Link to Comment virgilcaine
virgilcaine's picture

anything they can do to keep the debt slaves in their abodes.

Thu, 08/05/2010 - 11:30 | Link to Comment The Axe
The Axe's picture

Good luck getting a bank to lend to you,,,Christ the rates might as well be 4% or 3.5% very few people can get a bank to look at you--they laugh..While they buy 2 and 10s all day...bullshit

Thu, 08/05/2010 - 11:47 | Link to Comment virgilcaine
virgilcaine's picture

The Govt is going to take the losses for all the Underwater Re? and Cover all the Failed Banks?  Look at greece for the future.  Bonds would be worthless. Truly worthless iou.s.


but Notice all the Gold ads on  teve (with British accent sound effect)?  Could be ripe for a pullback

Thu, 08/05/2010 - 11:54 | Link to Comment belogical
belogical's picture

This is a terrible idea, but if you were going to do this they should have done it 18 months ago. Now people who lost their house are pissed and those who refinanced are pissed and everyone things the entire system is a farce

Thu, 08/05/2010 - 12:14 | Link to Comment wyosteven
wyosteven's picture

Farse is the wrong word.

More like pure unadulterated fraud.

In other words, business as usual.

Thu, 08/05/2010 - 12:11 | Link to Comment Bonesetter Brown
Bonesetter Brown's picture





20% 30% 50% OFF!!!

Thu, 08/05/2010 - 12:46 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Look, let's accept that they are going to have to spend more money.  The question, for housing, is how?


My offered idea is simply this: Floor house prices.  Put a floor under them.  Pass a law saying no residential house can be sold for less than its local property tax appraisal price of 2009, and this will remain so for 3 years.  Buyers will thus be backstopped and cannot lose money for a minimum of 3 years.  This *should* unlock transactions, especially for banks mortgage lending willingness.  The cost to the taxpayer should be far lower than the other rumors floated.

Thu, 08/05/2010 - 14:34 | Link to Comment Slim
Slim's picture

The problem is that buyers lose confidence in rigged markets.  If there's no price discovery, there's no confidence.  If I don't have confidence I demand a much bigger discount to cover my uncertainty - can't get my discount because the market is rigged with an explicit floor (they've been trying to put a floor through other means for a long time BTW - largely it's failed), basically buyers hold until prices discount or reality/price discovery is allowed to take hold.


Lots of people sitting on the sidelines and losing interest already.  A measure to more explicitly rig the market would make that even worse.


I don't have the answer by the way.  Honestly the government distorted things horribly on the way up with super low rates, removing legerage requirements on banks, encouraging securitization by allowing higher leverage on securitized loans than whole loans, eliminating red lining, and explicitly encouraging lending/housing into lower classes without stability and money.  Screwing with the market is what lead to this mania and pricing issues - alongside consumer greed and corrupt ratings agencies.  I'm hesitant to encourage them to continue to meddle as a solution.



Thu, 08/05/2010 - 14:44 | Link to Comment boomer
boomer's picture


Thu, 08/05/2010 - 16:07 | Link to Comment Disastra
Disastra's picture

Whos wants to help me arb the hellout of these rates by borrowing at the 30 year and owner financing at 8% + 5 year balloon to selected borrowers?

Fri, 08/06/2010 - 07:56 | Link to Comment Grand Supercycle
Grand Supercycle's picture

Interesting SP500 chart ...

Sat, 10/09/2010 - 10:01 | Link to Comment senthil456
senthil456's picture

There are certainly a lot of details like that to take into consideration.I read and understand the entire article and I really enjoyed it to be honest.
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