Posted on 05/23/2022 10:58:56 AM PDT by Browns Ultra Fan
As The Federal Reserve tries to fight inflation (it can’t thanks to Federal energy policies and bottlenecks), it is causing a disconnect between mortgage current coupon rate and the MBS index coupon. The disconnect is so bad that it is back to 1985 levels.
The Fed can certainly try to cool inflation, but Biden is intent on raising energy prices (leading to food price increases, and everything else) to shift us to electric cars. So, Biden is unlikely to back off.
So, The Fed is left trying to fight a war against inflation that only Biden can fight.
Meanwhile, the US mortgage market is getting pulverized
(Excerpt) Read more at confoundedinterest.net ...
We need a way to pulverize bidet.
Fight Inflation? Hell, Biden is Stoking Inflation. Doing everything possible to make it worse. I wish he would stop fighting inflation and just eat his damn ice cream.
Better yet stay out of the country FOREVER !!!
inflation is at early 1980s levels.
I paid 12% on a mortgage.
Mortgage money is cheap 5% compared to inflation 10%+.
Many top neighborhoods have not a single house left for sale.
Mortgage money should be around 12% since the mortgage rate should be the inflation rate 10% times (1/(1-.12[income tax at second lowest federal rate])) since this would maintain the buying power of the money lent.
10%/.88
MBS index coupon - Mortgage Banking...?
“mortgage current coupon rate”
Not at all clear
who pays the interest? Who gets the interest?
The Federal Reserve doesn’t have to do a thing to beat inflation.
Just leave interest rates to the marketplace.
Congress is spreading the inflation fuel.
Biden just tosses the match.
https://www.spglobal.com/spdji/en/index-family/fixed-income/collateralized/us-mbs/#overview
I believe they are what Fannie Mae et al. say the mortgage rates should be.
“A current coupon bond is one that is selling at a price at or close to its par value. In particular, the bond must have a coupon rate that falls within 0.5% above or below current market rates. Current coupon bonds are typically less volatile and are more liquid than other bonds with lower coupons because the coupon rate is closer to that set by the market.”
https://www.investopedia.com/terms/c/current_coupon.asp
“””but Biden is intent on raising energy prices”””
This is Biden’s success story.
Natural gas is up 8.56% today to $8.77.
Natural Gas was $2.50 when the Biden Crime Family moved into the White House in Jan 2021.
https://quotes.ino.com/charting/?s=NYMEX_NG.M22
Mortgage backed securities
MBS are Mortgage Backed Securities
The chart posted looks at the spread between what fractionalized mortgages sold in a package pay in interest today compare to what a Mortgage Charges in interest today.
Current rates SUCK for the borrower compared to what the existing borrowers (who have mortgages in a MBS pool) got a few years ago...
And to further clarify — the Mortgage RATE is the coupon on the home mortgage, 4%, 3%, etc... I borrow $300k for a home, they charge me that every year on the balance. The homeowner PAYS interest.
That mortgage and hundreds of others are put into a pool and fractionalized into bonds secured by the mortgages, becoming Mortgage Backed Securities that can be traded like a stock. When you buy a MBS, you are (usually) wanting to get paid more than you invested. The investor RECEIVES interest.
Back in the 80’s I paid 16 percent. Rates a very low. Everyone is crying over nothing. You can cry when your facing 16% rates that the older generation paid.
“Mortgage money should be around 12% since the mortgage rate should be the inflation rate”
Thirty year Rates are based on ten year yields.
They can stop printing paper dollars and sending out nancybucks.
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