Archive for November, 2008

Mortgage Rates News This Week

The financial markets hit some choppy waters this week. With successive drops of 427 and 445 points the Dow ended down substantially for the week.

For some positive news this marks the third week in a row where mortgage rates went down. The wild swings we saw earlier in mortgage rates have for the time being ended. The last 3 weeks saw less movement in all four of the major mortgage products.

30 Year mortgage rates are down to 6.04 dropping from 6.14 last week. All the other main mortgage products saw drops as well. Compared to the 30 year fixed rate the 5 year arm dropped a little more (.11 points from 5.98 to 5.87) and the 15 year dropped a little less (.08 points dropping from 5.81 to 5.73). Below are mortgage rates for the four major products for the last few weeks.

November 20, 2008
30-yr 6.04 15-yr 5.73 5-yr ARM 5.87 1-yr ARM 5.29

November 13, 2008
30-yr 6.14 15-yr 5.81 5-yr ARM 5.98 1-yr ARM 5.33

November 6, 2008
30-yr 6.20 15-yr 5.88 5-yr ARM 6.19 1-yr ARM 5.25

October 30, 2008
30-yr 6.46 15-yr 6.19 5-yr ARM 6.36 1-yr ARM 5.38

October 23, 2008
30-yr 6.04 15-yr 5.72 5-yr ARM 6.06 1-yr ARM 5.23

Moving on lets translate mortgage rates into a the mortgage payments one would pay on a 200k loan. We translated today’s rates as well as the rates from 3 weeks ago.

November 20th
30-yr $1204.24
15-yr $1658.67
5-yr ARM $1182.43
1-yr ARM $1109.36

October 30th
30-yr 1258.87
15-yr 1708.31
5-yr ARM 1245.77
1-yr ARM 1120.56

As we can see since October 30th the potential payment on a 30 year, 15 year and 5 year has come down quite a bit. The 1 year arm has remained relatively stable for the last few weeks. The 5 year rate is still probably the most unattractive mortgage product right now. Payments on the 5 year arm are pretty similar to the payments on a 30 year loan. Considering it’s hard to know where rates will be in 5 year it’s probably not worth to get a 5 year arm considering the small savings it currently offers.

The other thing we are seeing in the mortgage markets is that banks are still very reticent to give out loans. Zero down and no doc loans are pretty much dead. Because of the disappearance of no doc loans it has become harder for people that are self employed to get loans. Since so many potential borrowers have been pushed out of the market potential borrowers with 1031 jobs and money for down payments have very little competition for properties.

So what is going to happen moving forward. It’s hard to know what is going to happen with the economy in general. Although mortgage rates have been relatively stable recently if Obama makes any huge initiates in the housing market it could push mortgage rates pretty far in one direction or another. I expect that 30 year mortgage rates will stay above 5.8 until the end of the year simply because I don’t expect to see many major policy changes until Obama takes office.

Ki writes about trends with mortgage rates. His website provides a mortgage calculator widget and a tool that graphs mortgage interest rates

Mortgage Rates Drop For Second Week

Mortgage rates for most of the major mortgage products fell again this week. Although the drop was not as substantial as last week it is still nice to see rates come down this week. The 30 year mortgage rate fell from 6.20 to 6.14. The small movement this week marked a departure from the wild swings we have been experiencing recently. In fact the drop of .06 points in the 30 year mortgage rate was the first time 30 year rates didn’t move over .20 percent since October 9th. That said I would not preclude the possibility of us experiencing some more wild fluctuations over the next month. Nothing has happened that would seem to stabilize the markets. Looking at the other mortgage products 15 year rates dropped .07 points (from 5.88 to 5.81) and 5 year arms dropped .21 points (from 6.19 to 5.98). The 1 year arm was the only rate to increase moving up .08 points (from 5.25 to 5.33). Below are rates for the major mortgage products for the last few weeks.

November 13, 2008
30-yr 6.14 15-yr 5.81 5-yr ARM 5.98 1-yr ARM 5.33

November 6, 2008
30-yr 6.20 15-yr 5.88 5-yr ARM 6.19 1-yr ARM 5.25

October 30, 2008
30-yr 6.46 15-yr 6.19 5-yr ARM 6.36 1-yr ARM 5.38

October 23, 2008
30-yr 6.04 15-yr 5.72 5-yr ARM 6.06 1-yr ARM 5.23

October 16, 2008
30-yr 6.46 15-yr 6.14 5-yr ARM 6.14 1-yr ARM 5.16

Looking at changes in mortgage rates is interesting but it’s always nice to see what they translate into as far as a mortgage payment. Using our free mortgage calculator we translated the rates for the last two weeks into what they would mean for a 200k mortgage.

November 13th
30-yr $1217.16
15-yr $1667.25
5-yr ARM $1196.53
1-yr ARM $1114.33

November 6th
30-yr $1224.92
15-yr $1674.77
5-yr ARM $1223.64
1-yr ARM $1104.40

October 30th
30-yr 1258.87
15-yr 1708.31
5-yr ARM 1245.77
1-yr ARM 1120.56

So in the last two weeks the monthly payment on a 200k loan would have dropped $41.10 from $1258.87 to $1217.16. So what would be my advice for people looking for mortgage rates right now? First off I would avoid the 5 year arm. The small difference between the 5 year arm and the 30 year mortgage makes the 5 year arm pretty unappealing. In addition, the unstable nature of the market makes locking in to a longer loan term more appealing. If one gets a 30 year loan and rates move down they can always refinance to take advantage of the lower rate.

We talked a lot about rates but the other major factor in today’s market is the difficulty of getting approved for financing. Banks have become more reluctant to give out loans and that means credit scores are very important. If you are thinking of getting a mortgage soon I would start looking at your credit sooner rather than later. Also no doc loans are pretty much dead. So if you are self employed and received a no doc loan in the past I would not expect to get one in the current environment. So that basically means its a good idea to start preparing for a loan earlier in the process (talking to a loan officer, getting paperwork ready). Talking to a loan officer at later in the process without prepared documentation is probably a recipe for disaster.

So what is going to happen with rates over the next few months? Mortgage rates have been swinging wildly up and down recently. I expect to see some more large swings moving forward. That said I expect rates to stay roughly between 5.8 and 6.6. I don’t expect them to fall below 5.8 as long as banks have an uneasy feeling about the market. I don’t expect them to go above 6.6 any time soon because the government has made it clear they are going to do whatever they can to keep rates low.

Ki helps buyers looking for real estate in Austin. His website provides a search of the Austin MLS along with a free mortgage calculator and a tool that graphs mortgage rates.

Mortgage Rates Drop After Fed Cut

The Fed cut the fed funds rate at the end of October. The rate was dropped from 1.5% to 1%. This is the lowest the rate has been since 2003. Following the cut we saw drops in all the major mortgage products. The 30 year dropped from 6.46 to 6.2. The largest drop was in the 15 year mortgage which fell from 6.19 to 5.88 a drop of .31 points. 5 year arms and 1 years also fell .17 and .13 respectively. Below are mortgage rates for the last several weeks.

November 6, 2008
30-yr 6.20 15-yr 5.88 5-yr ARM 6.19 1-yr ARM 5.25

October 30, 2008
30-yr 6.46 15-yr 6.19 5-yr ARM 6.36 1-yr ARM 5.38

October 23, 2008
30-yr 6.04 15-yr 5.72 5-yr ARM 6.06 1-yr ARM 5.23

October 16, 2008
30-yr 6.46 15-yr 6.14 5-yr ARM 6.14 1-yr ARM 5.16

As we can see from the numbers rates have been moving back and forth over the last few weeks pushed around by different bits of economic news coming out. And this week of course by the recent cuts by the fed. Let’s look at what a mortgage would be this week on a 200k loan based on current rates. We also looked at what the mortgage would be for a 200k loan based on last weeks rates.

November 6th
30-yr $1224.92
15-yr $1674.77
5-yr ARM $1223.64
1-yr ARM $1104.40

October 30th
30-yr 1258.87
15-yr 1708.31
5-yr ARM 1245.77
1-yr ARM 1120.56

So first off my advice would be to avoid the 5 year arm. Since the mortgage is so close to what you would be paying on a 30 year fixed mortgage their is almost no reason to consider a 5 year arm. I would also probably avoid a 1 year arm. With mortgage rates acting so wildly its pretty likely rates could be much higher a year from now. If you get a 30 year fixed and rates drop substantially you can also refinance at the new lower rate. If you get a 1 year arm and rates increase there is not much you can do but simply make higher payments.

So what is going to happen moving forward. I have heard some speculation that rates are going to increase this month. I don’t know if rates will be higher a month from now but I think rates will continue to see the atypical large weekly fluctuations we have seen the last few weeks.

There has also been some speculation that the fed will raise rates if the market starts to improve. I don’t think this is a foregone conclusion. If the economy starts to improve I don’t think the government will move quickly to raise rates. Basically the financial crisis has been so severe that if we start to move beyond it politicians will be worried of raising rates too quickly will botch a potential recovery. Or if the recovery fails for other reasons they will be blamed anyway. Therefore I think priority number 1 over the next year will remain the real estate and mortgage markets and that translates to keeping the fed rate low. Of course keeping the fed rate low does not guarantee that mortgage rates will stay low.

Ki is a realtor in Austin Texas. He writes regularly about mortgage interest rates. His site offers free mortgage calculator html for webmasters and a widget that shows current mortgage rates

Mortgage Rates Have Gone Haywire

This marks the third week in a row that mortgage rates have moved in one direction or another by more than .4 points. This is highly unusual. For some perspective for the 12 weeks from March 20th to June 5 mortgage rates held steady between 5.85 and 6.09. At this point mortgage rates are highly highly volatile. Here are mortgage interest rates for the last 4 weeks.

October 30, 2008
30-yr 6.46 15-yr 6.19 5-yr ARM 6.36 1-yr ARM 5.38

October 23, 2008
30-yr 6.04 15-yr 5.72 5-yr ARM 6.06 1-yr ARM 5.23

October 16, 2008
30-yr 6.46 15-yr 6.14 5-yr ARM 6.14 1-yr ARM 5.16

October 9, 2008
30-yr 5.94 15-yr 5.63 5-yr ARM 5.90 1-yr ARM 5.15

October 2, 2008
30-yr 6.10 15-yr 5.78 5-yr ARM 6.00 1-yr ARM 5.12

30 Year rates have been a little more volatile than the 15 year fixed and 5 year arm products. The one mortgage product that stands out is the 1 Year ARM. It has for the most part been steadily rising over the last few weeks.

So what is going on with mortgage rates? Basically there are a number of strong forces pushing around mortgage rates like a wild hurricane. Over the last few weeks we have seen similar erratic swings with the stock market with both historic rises and drops happening several times in the last week. Add to the uncertainty in the economy with massive government bailout programs (the Fannie Mae takeover and the 700 billion bailout) we can begin to see that the erratic movement in mortgage rates is simply a reflection of a highly erratic time period in the general economy.

Ok let’s look at what your payment would be on a 200k mortgage. Using our mortgage calculator we ran the numbers based on today’s mortgage rates. We also ran the numbers based on mortgage rates from last week.

October 30th
30-yr 1258.87
15-yr 1708.31
5-yr ARM 1245.77
1-yr ARM 1120.56

October 23rd
30-yr 1204.24
15-yr 1657.60
5-yr ARM 1206.82
1-yr ARM 1101.93

It’s hard to tell what rates are going to do moving forward. But it looks like rates will continue to remain volatile. What we are seeing is basically a tug of war between the government and the economy. The government is doing whatever it can to push down rates through takeovers, bailouts and lowering the fed rate. Negative factors that come up in the economy tend to push rates up because it causes banks to not want to lend out money. I think we will continue to see this tug of war for the next few weeks. Add a presidential election throw in for good measure and I expect to see mortgage rate volatility to continue. That said overall I expect mortgage rates to go down over the next month. The government shows no signs of letting up and I think they will win the tug of war in the long term.

What recommendations do I have for people looking for a loan? I hate recommending arms. If people are looking at the buying for a long term (single family home owners) I would advise to avoid arms. If investors are planning on being in a property for a short period of time and have the cash reserves to deal with random changes in mortgage payments the 1 year is attractive because the difference between 30 year and 1 year arms is greater than what we typically see.

Ki lives in Austin are writes about trends with mortgage rates. His site provides a free mortgage calculator and a graph of historical mortgage interest rates.