Mortgage Rates Start to Rise

Mortgage rates rose slightly this week. The lowest rates we have seen in the last 50 years came just 2 weeks ago when 30 year mortgage rates hit 4.78. Since then rates have risen slightly to 4.86. Although off of record lows mortgage rates are still very low by historical standards. The 15 year rate held mostly steady sitting at 4.52 but .04 points above its all time lows.

While the 15 and 30 year dropped both the 5 and 1 year arm fell this week. The 5 year arm fell from 4.90 to 4.82. The 1 year arm dropped to a 4 year low falling from 4.78 to 4.71. In spite of this arms still seem to be a bad choice because they are not that much lower than the 30 year rate. In addition, it's expected that rates will be higher in 5 years so it's better to lock in for a longer period of time at current mortgage rates. Below are rates for the different mortgage products for the last few weeks along with rates from November 13, 2008 (6 months ago).

May 14, 2009
30-yr 4.86 15-yr 4.52 5-yr ARM 4.82 1-yr ARM 4.71

May 07, 2009
30-yr 4.84 15-yr 4.51 5-yr ARM 4.90 1-yr ARM 4.78

Apr 30, 2009
30-yr 4.78 15-yr 4.48 5-yr ARM 4.80 1-yr ARM 4.77

Apr 23, 2009
30-yr 4.80 15-yr 4.48 5-yr ARM 4.85 1-yr ARM 4.82

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

In addition to rates we always like to look at actual mortgage payments. Using a mortgage calculator we determined payments for a 200k mortgage based on mortgage rates for different dates.

May 14
30-yr $1056.59
15-yr $1532.03
5-yr ARM $1051.74
1-yr ARM $1038.47

May 07
30-yr $1054.17
15-yr $1531
5-yr ARM $1061.45
1-yr ARM $1046.91

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

As we can see mortgage payments would be slightly higher today compared to a week ago. But they are substantially lower than 6 months ago. For a 200k mortgage payments would be $160.57 less today or 13.19 percent less.

So what is our advice for people looking for a house in the next few months? First of all I would start talking to mortgage brokers or potential banks as soon as possible. Although rates are low banks are still pretty skittish about giving out loans. This means that banks are not giving out loans over minor problems with people's credit reports. Therefore it's best to find out if there are any problems in one's credit report as soon as possible so they can be fixed.

It's also a good idea to lock in rates if you have found a suitable property. Moving forward there is more of a risk of rates rising significantly than falling. This is partially because rates don't have much more room to fall. The government has been working to keep rates down but it's unclear how much longer than can keep rates this low. As we talked about earlier there is no real reason to consider 5 and 1 year arms the little savings they offer do not seem like a worthwhile tradeoff compared to the chance to lock in at mortgage rates that are near all time lows.

Ki works in Austin Texas. He runs a site covering the Austin Texas real estate market. His site also provides webmasters a free mortgage calculator and a mortgage widget that shows updated mortgage rates.