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The “Sheep Effect” On Your Housing Payment

2008
07.09

In times of uncertainty, mortgage bond traders make like sheep and follow the herdA noon-hour, mortgage-bond rally rendered homes more affordable for Americans Tuesday. It was the second straight day on which this happened.

On both days, the action was swift.

The speed at which Monday’s and Tuesday’s respective rallies tore through mortgage markets illustrates how deep the uncertainty that surrounds the U.S. economy really is.

One reason why the market swings so quickly is that, lately, traders are tending to follow the herd.

As a mortgage rate shopper, it’s outstanding when the herd is moving in your favor. However, when the herd moves in the opposite direction, the impact on your monthly housing cost can be huge.

Volatility has been the common theme for mortgage rates in 2008 and it’s likely to remain a factor until the nation’s economic picture gets a little bit more clear.

Some experts are saying that may happen in 2009. Therefore, you should be prepared for rapid mortgage rate movement and act accordingly when you see a rate-and-payment combination that makes sense for your household budget.

The payment you see in the morning is likely to be gone by the afternoon.

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