Ben, the Fed and Mortgage Interest Rates [Live Post]

Today the Fed will announce if they're going to change the Fed Funds rate. It's highly anticipated that they will leave the rate where it's currently at.  What ever action the Fed takes does not directly change mortgage rates, however it does have a strong INFLUENCE on mortgage rates.  Following the Fed's announcement, Ben Bernanke will be holding a press conference which may also impact mortgage rates. Remember, mortgage rates are based on mortgage backed securities (bonds) and inflation will drive mortgage rates higher.  

This is a live post to illustrate how the Feds actions may impact mortgage rates, assuming the markets don't shrug off the information.

As of 9:00 am this morning, prior to the Fed's monetary decision and MBS (FNMA 30yr 4.00%) are up 34bps.  What you and I probably relate to more than mortgage backed securities (MBS) are how this translates to mortgage rates. 

I can lock in a 30 year fixed at 4.375% (based on the criteria I use for rate quotes) with a discount of 0.198% (apr 4.503).  

5/1 ARM is currently at 2.875% (apr 3.256) with a discount of 0.043%.  5/1 ARM is fixed for 60 months and has caps of 5/2/5.  The highest this rate can be at the 61st payment (or the life of the loan) is 7.875%. 

11:10 am: we're minutes before Ben Bernanke's news conference.  Mortgage rates that I've quoted are unchanged.

9:25 am: DOW is down about 7 points.

"No change" to interest rates is announced.  The Feds Funds rate is unchanged at 0 – 0.25%.  Good news to those who have home equity lines of credit which are based on the prime rate, they've dodged another bullet!

Initial reaction: markets seem unmoved. No real surprises in the FOMC press release.

9:31 am: Receiving an intraday rate sheet with pricing for the better from one of the lenders we work with.  This lender did not have as competive pricing as what I quoted above (they're still far from it) as the began the day with worse pricing. The rate quotes above is still current pricing that I have available.

9:50 am: In just over an hour, we'll hear from Fed Head, Ben Bernanke.  Stay tuned. I'll continue to share rate updates and updating this "live" post.

10:30 am: MBS down to session lows at 15bps for the 30yr.

11:10 am: minutes before Ben Bernanke's news conference and mortgage rates are unchanged from what I've quoted above.  DOW is up 7.46.

12:15 pm: Ben Bernanke has wrapped up the news conference.  MBS are up slightly to 22bps with the DOW down 32. Mortgage rates and pricing that I quoted above are unchanged.

I listened to as much of Bernanke's conferene as I could while I was work on my day job, originating mortgage on homes located in Washington.  Some bits that I extracted (and shared on Twitter) are that Bernanke referred to the pace of unemployment being "frustratingly slow".  During the Q&A he said that "we don't use words like "extended period" to be intentionally opaque, it means that we really don't know how long".  Regarding housing, he commented that "those who can get credit, can buy a lot more house than they could a few years ago" referring to low rates and affordable home prices. He would like to see further efforts from mortgage servicers to modify loans when appropriate and to speed up the foreclosure process when appropriate.

DOW closes down 80.34.  

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