Fall and rise of mortgage rates
Mortgage rates are very important in one countries economy as many banks depend on the securities having backed up the mortgage. Also about the mortgage there is a saying in the old business people that "rates take the stairs down and the elevators up" which means that the rates take a fairly long time to come down where as mortgage rates tend to rise sharply. This saying is used in older crowds. Keeping in view this saying we will study the today's mortgage rate and we will prove this statement wrong.
Defining a Methodology
Now we try to found out the truth behind this saying and see that are really the rates rises faster than they tend to go down. For this purpose we will take the Fannie Mae 4% coupon's daily pricing as since last November of 2009 it acts as a basis of mortgage pricing and also this is suitable for the purpose of our study. Also keep in mind that the refi boom is irrelevant so the notion that we are in the middle pf refi boom is meaningless to know why read of the following lines.
First point in this regard is that the rates fall in 20 of 27 weeks starting from the April 2010 but when we see the of the records of the past 52 weeks we will find that there is a ratio of 5 weeks when mortgage rates tends to decrease.
Second thing in this regard is that if don't take it weekly if we take the daily changes we will found that on the daily basic the change in mortgage rates is 54% which is almost half of the points.
The last most important point is that we are interested in the daily changes in mortgage rates and not looking at the weekly so the refit's boom longevity is totally pointless as we are only studying the rates that how quickly they get better or get down over time.
The 4 Zones of Mortgage Pricing; How They Change Rates
Keep in mind that the mortgage changes daily and these daily changes can be easily divided into four categories in accordance with their impact on the mortgage rates offered by banks to the home owners. The categories are stated below.
1. Change of up to 25 basic can cause no change in mortgage rate.
2. Change from 25 to 37.5 points can cause 0.125% change
3. Change in 37.5 to 75 points can cause 0.250% change in rates
4. Change above 75 points can cause 0.375%change in mortgage rates.
So after keeping in mind this classes when we will study the changes during last year we will found that during the year
1. Days with no change in rates are 128
2. Days with 0.125% increase are 36 and decrease are 50
3. Days with 0.250% increase are 21 and decrease are 50
4. Days with 0.375% increase are 6 and 3 of lower rates.
As 0.125% is almost normal change so taking it as no change when we see the data again we will found a surprise that on the days with big rates changes % or more but decrease in rates outnumbered the increase by 2:1 Which is against that old saying and quite surprising also.
Defining a Methodology
Now we try to found out the truth behind this saying and see that are really the rates rises faster than they tend to go down. For this purpose we will take the Fannie Mae 4% coupon's daily pricing as since last November of 2009 it acts as a basis of mortgage pricing and also this is suitable for the purpose of our study. Also keep in mind that the refi boom is irrelevant so the notion that we are in the middle pf refi boom is meaningless to know why read of the following lines.
First point in this regard is that the rates fall in 20 of 27 weeks starting from the April 2010 but when we see the of the records of the past 52 weeks we will find that there is a ratio of 5 weeks when mortgage rates tends to decrease.
Second thing in this regard is that if don't take it weekly if we take the daily changes we will found that on the daily basic the change in mortgage rates is 54% which is almost half of the points.
The last most important point is that we are interested in the daily changes in mortgage rates and not looking at the weekly so the refit's boom longevity is totally pointless as we are only studying the rates that how quickly they get better or get down over time.
The 4 Zones of Mortgage Pricing; How They Change Rates
Keep in mind that the mortgage changes daily and these daily changes can be easily divided into four categories in accordance with their impact on the mortgage rates offered by banks to the home owners. The categories are stated below.
1. Change of up to 25 basic can cause no change in mortgage rate.
2. Change from 25 to 37.5 points can cause 0.125% change
3. Change in 37.5 to 75 points can cause 0.250% change in rates
4. Change above 75 points can cause 0.375%change in mortgage rates.
So after keeping in mind this classes when we will study the changes during last year we will found that during the year
1. Days with no change in rates are 128
2. Days with 0.125% increase are 36 and decrease are 50
3. Days with 0.250% increase are 21 and decrease are 50
4. Days with 0.375% increase are 6 and 3 of lower rates.
As 0.125% is almost normal change so taking it as no change when we see the data again we will found a surprise that on the days with big rates changes % or more but decrease in rates outnumbered the increase by 2:1 Which is against that old saying and quite surprising also.