Pasco Wa Real Estate ~ Your secret to best mortgages in todays market
November 10th, 2006
| Pasco Wa Real Estate ~ If you qualify for prime lending terms, there isn’t much reason to select an [tag]adjustable-rate mortgage[/tag] (ARM) in the current market. For most such borrowers, the temporary rate benefit in the early years is too small to justify the risk of higher rates later on. This is a consequence of what has been referred to as a “flattening of the (bond) yield curve.” The [tag]yield curve[/tag] is a graph that shows, at any given time, how the yield varies with the period to maturity. A flat yield curve means that yields on long-term bonds are not much higher than those on short-term notes. |  |
Pasco Wa Real Estate ~ Bond markets affect [tag]mortgage[/tag] markets, and vice versa, because a large part of all new mortgages are converted into [tag]mortgage-backed securities[/tag] (MBSs), which investors view as close substitutes for government securities and high-quality corporate bonds. Developments in the MBS market, in turn, are immediately reflected in the primary mortgage market where individual borrowers obtain their loans. When the bond yield curve flattens, the [tag]mortgage yield curve[/tag] facing borrowers flattens as well. This means a marked reduction in the rate differences between fixed-rate mortgages (FRMs) and ARMs. It also means smaller rate differences between FRMs with different terms.
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