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THIS MORNINGS QUICK LOOK

1.  TOUR DE MTG FINANCE – What Short Term Rates Mean
2.  PRODUCT HIGHLIGHT – Cash Out Or HELOC
3.  MARKETING – Stories Vs Facts

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WHAT SHORT TERM RATES MEAN

If you have been watching the news of late or heard me talking about short term rates on the rise but long term not so much.

What does that mean?

So, the rule is the higher the risk the higher your rate of return. Typically, long term debt is a higher risk than short term debt. Lots of stuff can happen so the longer you give your money to an investment the greater return you get.

What you are hearing when you hear short term rates going way up means that essentially the shorter term rates are riskier than the long term prospects which results in an inverted yield curve.

Picture a graph with 1, 2, 5, 7, and 10 year treasury notes. It should go from bottom left to top right. The longer the term the higher rate of return investors get.

Well, right now it is flat and becoming inverted. That means the 1 and 2 year is close to the same yield an investor can get on the 10 year and the 5 and 7 year has a BETTER yield than the 10 yr.

Now what happens? Well, it is huge indicator of a coming recession which we all expect to hit and lower rates in the next couple years sometime.

As an example check out the following:

ON SEPTEMBER 20, 2021
10 YEAR TREASURY WAS 1.50 YIELD TO INVESTORS
1 YR TREASURY – .06 – 144 BPS SPREAD FROM 10 YEAR
2 YR TREASURY – .21 – 129 BPS SPREAD FROM 10 YEAR
7 YEAR TREASURY – 1.11 – 39 BPS SPREAD FROM 10 YEAR

YESTERDAY, MARCH 28TH
10 YEAR TREASURY WAS 2.44 YIELD TO INVESTORS
1 YR TREASURY – 1.69 – 75 BPS SPREAD FROM 10 YEAR
2 YR TREASURY – 2.33 – 11 BPS SPREAD FROM 10 YEAR
7 YR TREASURY – 2.44 – 7 YR IS 10 BPS BETTER THAN 10 YEAR

Now, we compete with the 10 year treasury so why exactly would someone invest in a mortgage bond or a 10 yr treasury when we can get a higher rate of return on a shorter term loan. Look at the spread differences above and you will see how much short term rates have kicked up.

When a recession does begin to hit investors then tend to move towards longer term bonds due to the sell off of the equities market (stocks) during a recession brings people towards the safe haven of bonds and the likelihood that long term bonds will go down hence it is a great position to be in as an investor as they can sell their investment at a premium due to declining rates.

As with anything timing is everything and good luck figuring that out.

At least you can somewhat explain it to your clients now

Product & Guideline Highlight Knowledge That Gives You An Edge Over Your Competition

CASH OUT OR HELOC

Many of you when asked by a borrower should I just go get a HELOC or is a cash out a good option for me and raising my mortgage interest rate?

Here is where the devil is in the details. Of course, it does depend on the amount of cash out and a small amount of cash out will likely be better on a HELOC.

But, make sure you talk intelligently about the near future. Depending on how much the FED hikes rates this year it could have a Fed Funds Rate up to 3+%. 

If that is the case then their HELOC will likely be in the 6%+ rate range with prime.

Therefore, if they can get a cash out arm in the 4’s they may be better off than a lower first and a 6%+ HELOC rate. 

Either way just make sure with the known rate hikes which includes car loans and credit cards a cash out may be the best option for them.

Marketing Ideas And Opportunites Little Things That Can Make A Big Impact

STORIES VS FACTS

I think we all know that people love stories. It is why Hallmark and Nike and other brands that tell a story sell better than those who just put out the facts.

Go look at your advertising and assess the message you deliver to your clients.

Do you give Facts like you provide FHA, VA, USDA, CONV and 97% Financing and I offer great customer service or do you tell a story of who you are, who they are and why together you will make a great team to help them own their dream home of a lifetime. 

It is why pictures always sell more than words. 

I get very few responses each day which is fine but on the days where I put a very personal message in this section is the day I get the most responses.

It is because I related to someone in a way that they are going through a part of their life.

When you relate to someone in that way they respond. Figure out how you can relate better to your clients and your response rate will increase.

Turn Times As Of This Morning Lookin Good!