Mortgage News

This week's mortgage news update provided by:

Yvette Picard,

Synovus Mortgage Corp.

334.399.5437

Goldman Sachs expects that the Federal Reserve will

end its second round of quantitative easing in June, and that 10-

year Treasury yields (a benchmark for 30-year mortgage rates)

will climb to 3.75 percent by year-end, and then advance to 4.25

percent by the close of 2012. The historical average spread

between a prime 30-year fixed-rate mortgage and the 10-year

Treasury note is around two percentage points, which means if

Goldman Sachs proves accurate on its prediction, we could be

looking at 5.75 percent 30-year loans this year and 6.25 percent

loans in 2012.

Of course, a forecast is no sure thing. In fact, forecasts are often

wrong, but there are mitigating circumstances to consider. A

majority of top decision-makers at the Federal Reserve believe

that concerns over falling prices have eased and that inflation

will gradually rise. Recent data support that belief: employment

is improving – ADP Employer Services reports that 297,000

new private-sector jobs were created in December, triple the

consensus estimate; manufacturing has expanded for 17-

consecutive months; stocks continue to trend up; and rising

food, energy, and commodity prices are stoking inflation fears.

Our advice remains the same as it has for the past two months:

get the mortgage application in, and, unless you have a strong

gambler's constitution, lock instead of playing the floating-rate

game. We don't think borrowers will be giving up much. Let’s

remember that we are still within 50-basis points of a 50-year
low.