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A Day to Remember in Mortgage Rate History

On October 15th, 2014, mortgage-back security (MBS) fluctuated more dramatically then has been seen since 2011. MBS’s give small banks the ability to provide mortgages without having to determine whether the borrower has enough assets to pay back the loan. In an MBS, the bank is the middleman between the investors and the mortgage borrower. Mortgage-back security cause mortgage rates to drop and rise inversely. When MBS increases, mortgage rates decrease and vice versa. It seems that because of the U.S. dollar’s strength, the fears with Ebola and ISIS, and the problems the economy in Europe is having, investors are returning to the U.S, investing in MBS’s.

The fluctuation that was seen on October 15th was primarily positive. Bond rates fell more that day than they had in over a year. When bond rates increase, the yield decreases. Therefore on October 15th, when the bonds decreased dramatically, the yield was increasing at a substantial rate. However, at the end of the day, the bond rates were only slightly lower than they had been at the start of the day.

At the end of the day on October 14th, the bond rates were in the high 3’s. During the day of October 15th, the rate dropped to a low between 3.625-3.75%, which is the farthest drop in over a year. But, right at the end of the day, the rate came all the way back up to 3.875%. The 30-year fixed rate was at 3.875%, the 15-year fixed rate was at 3.25%, the FHA/VA loan rate was at 3.375%, and the 5 Year ARM rate was at 3.375%.

What does all this mean for you? If you are looking to buy a new home or need to refinance your loan, now is the time. Mortgage rates are at a low, meaning that you could lock in a low mortgage rate deal that is applicable for years.

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