Mortgage Rates Are Low, But They Should Be Even Lower!

Jan. 18, 2009 - PRLog -- Florida mortgage rates on a standard 30 year fixed loan this week hovered between 4.75%-4.8% for the most part. What is interesting and deserves to be looked at deeper is the fact that interest rates should actually be much lower than they are right now.

The mortgage backed securities market (MBS) which is what sets mortgage interest rates through regular market buying and selling indicates that rates should be in the low 4% range right now. Unfortunately for everyone however, they are not. This provokes the question... why aren't they then?

Well the answer to this can get quite complicated. In the interest of keeping the answer simple we must look at the state of the mortgage market. It has been dissimated. It is a completely barren wasteland. The survivors are bandaged and wounded. They wnat to survive but they are survival mode right now just to stay afloat. What would happen if lenders offered the rates to consumers as they should be right now based on market conditions, they would be overwhelmed with new loan applications and their entire operation would become bogged down to a crippling slow speed.

The reason for this is simple. In an effort to keep their doors open lenders have had to strip their operations to the bones. They have fired sales staff, underwriters, funders, processors, and every other position from top to bottom. The lenders are looking to make only the best loans which provide investors with the greatest level of security.

Now we see ourselves in a situation where interest rates are so low that investors who have taken a 2 year hiatus are testing the waters again with huge deals to be had. Also people who have loans are chomping at the bit to get a new 30 year fixed mortgage locked in below 4.5%.  The lenders simlpy don't have the capacity to make all of the loans that there will be demand for when rates fall into the low 4% range.

We have a great example of a more aggressive lender that came out with rates in the 4.25% range several weeks ago. Within there hours they had to send out and emergency email to all of their broker partners that they had to cut of their lock desks and issue a new rate sheet with higher rates. They simply can't handle the demand that is in the market today. Underwriting turn times jump from 48 hours to 15-21 days. The only way that lenders can moderate their pipeline of new submissions is by setting HIGHER interest rates when they have all the loans they can handle.

Normally in a market such as this the lenders would be competitively trying to price each other out to grab more market share. In a normally operating market we would easily have par interest rates of 4.125%-4.5% today instead of the 4.8% that is made available to us....

Read full article from source: http://www.fivestarsmortgage.com/mortgage-articles/26/

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About Five Stars Mortgage: Five Stars Mortgage is a Florida based mortgage broker business. We are providing residential, fha, va, and commercial financing to our clients.

Please visit us on the web at: http://www.fivestarsmortgage.com