Two bits of news are out this morning that just give a ‘mortgage guy’ indigestion. (Oh, and if you’re in the market for a home, it should you, too.)
First, if you have been following the news at all recently you are aware that Greece is in a world of hurt. It’s debt as a percentage of GDP is way, way off the charts of what is allowable under European Union guidelines, and under sane money management. There was talk that Germany and France would bail them out, then clean up the mess in whatever way they could dream up.
In the meantime, nearly all public sector workers are on strike (which is somewhat of a national pastime anyway in Europe). But it seems extreme right now.
And, this morning the news came out that Angela Merkel put the brakes on any financial bailout for Greece. That leaves just two options for the Greeks – either reign in spending in a big way and cause major social unrest, or look at defaulting on their debt. The first is very bad for the Greek citizens, as it would put Greece into a depression. The latter would be bad for all of us, since so many countries hold bond from the country, which would become worthless. Banks would fail, and bond markets around the world would shudder.
Second, Mortgage Backed Securities – those bonds that determine long-term mortgage interest rates for Atlanta and the country – are trading at just more than half a point above the 10 year treasury bond.
So what?, you may flippantly say.
So MBS traditionally trade at 1.5-2% above the 10-Year. And nature likes an equilibrium. Couple that with the fact that the Fed is easing out of being the principle buyer of Mortgage Backs, and it looks and feels like a tightly wound spring, ready to spring higher.
Sure, the government just handed Fannie and Freddie some $70 billion to buy delinquent mortgages – and that smells of buying MBS, which could help keep rates low a bit longer. But, that is small change compared to the $1.25 trillion already nearly spent to keep rates low.
What to do? Simple.
If you are in the market for a metro Atlanta refinance, lock now. And if you are close to buying a home around Atlanta, lock now.
You probably did not like that Jack-in-the-box when you were a kid as it popped out with the clown head bouncing. And they don’t get any better with age – especially when it costs you real money every month…for 30 years!
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