Hurricane Sandy’s Impact On Rates

*Hurricane Sandy’s Impact On Rates*
**By Tony Garritano**

***Personally I was without power for eight days because of the storm. Thankfully I’m back. But what will the storm mean for our industry? While the recent employment numbers and the jobs report were good, the results in interest rates and the stock market were not. This is customarily due to the Federal government continuing to purchase mortgage-backed securities (MBS) but Hurricane Sandy added yet another factor. According to Residential Finance Corp.’s chief market strategist, Barry Habib, these developments could be the catalyst for even lower interest rates.

****“It was a pretty good jobs report, however when you look at the average work week and the hours worked on a weekly level, you are seeing a decline in the amount of income,” Habib explained. “You can surmise that it is good that more jobs are being created, but they are probably lower paying jobs.”

****“A lot of people look at the unemployment rate picking up from 7.8 to 7.9 percent but there is actually a good reason for that: the labor force expanded.”

****As for homeowners looking to refinance and new borrowers, Habib shared these observations:

****“While a report like this would normally lead to higher interest rates and better stock prices, that isn’t happening today. In fact, we are seeing the reverse where the rates are very modestly improving and the stocks are declining. The reason is probably on the stock side due to the fears of the impact of Hurricane Sandy, which will clearly have some negative impact on the economy and there is some anticipation of that happening.

****“Part of the reason why bond prices are improving due to this news points to two reasons, we already know the Fed are buying mortgage bonds, which is helping MBS pricing and keeping interest low. I think you will be hard pressed to see the Feds taking their foot off the gas pedal when you see a devastating event like Hurricane Sandy creating a terrible drag on the economy.

****“If I am a homebuyer or someone looking to refinance, this probably is good news for the longer term for interest rates to remain low; it also may create – based on the psychological effects of this terrible storm – a temporary drag on housing which means this is a time period where people could get additional value.”

****Habib cautions consumers who want to wait to see if interest rates indeed dip lower could risk that not being the case or perhaps even lose the monthly mortgage savings while they wait.

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at