Mortgage Interest Rate Update

Interest rates droped at the end of the week as investors reacted negatively to the debt limit increase legislation. Most investors did not believe that Congress had done enough to address the long term problems of the deficits. Stocks fell dramatically as investors moved into bonds, thus driving their prices up and yields down. Interest rates will probably move right back up, however, as the rates quoted below, do not yet reflect the shocking news on Friday that Standard and Poors had lowered the United States Government's debt rating from AAA to AAa, also believing that Congress had not done enough to address the deficit. This could easily lead to at least a quarter of a point increase in interest rates since the interest rates on T bills will go up, and most mortgage rates are tied to T bill rates. One thing is certain.  Interest rates will be volatile next week. The following are some excerpts from this week's newsletter on interest rates from HSH Associates :

" Last week we noted that we expected "a bit of volatility in the market" this week, but got far more than we bargained for. In what appeared to be a delayed response to the accumulated information of a couple of dismal GDP figures last Friday, compounded by a worrisome report on manufacturing and consumer spending early this week, a huge stock market rout on Thursday produced a like-size flight-to-safety rally in Treasuries, driving mortgage rates down. The demand for a safe investing haven even turned some short-term Treasury yields negative for a time, actually costing investors money for a place to park cash.

In an unusual twist and one reflective of the difficult investing environment, at least one major moneycenter bank -- Bank of New York Mellon -- announced that there would now be a 0.13 percent fee for institutional clients who have more than $50 million on deposit. The cost of managing this cash on deposit would normally be offset by some return on investments the bank would make, but profitable short-term investing opportunities are few and far between. So-called "hot money" has been rushing from money market funds to short-term treasuries to deposit accounts looking for a place to hide from uncertain markets; this will no doubt be a deterrent to continuing that practice. So far, no other banks have yet followed suit. That an investor might get a negative rate of return is a happenstance of investing, but a guaranteed loss of capital in return for safety makes stuffing cash in the mattress a real consideration."

The following are interest rate quotes from Al Hermann of American/California Financial Services ,      

30 Yr Fixed FHA
 
Rate  4.250 APR 4.948
         

Conforming 30 Yr Fixed up to $417000
 
Rate 4.490 APR 4.642

Conforming Jumbo 30 Yr Fixed $417001 - $729750
 
Rate 4.625 APR 4.770

Jumbo 30 Yr. to $1.5 Mil
 
Rate 4.875 APR 5.012

Jumbo 7/1 ARM $1.5 Mil (higher loan amt available)
 
Rate 3.990 APR 3.369
         
 
The following are interest rate quotes from Jan Schott Bank of America, Home Loans jan.schott@bankofamerica.com 310-802-2300 :

Conforming Loans to $417,000

5 Yr Fixed:         2.875% @ .500/pts              3.000% @ 0/pts

30 Yr Fixed:      4.250% @ 1.000/pts            4.375% @ 0/pts

Conforming High Balance to $625,500

5 Yr Fixed:         2.875% @ 1.000/pts            3.125% @ 0/pts*

                30 Yr Fixed:     4.375% @ .375pts       4.625% @ 0/pts

Non-Conforming to $729,750 (temporary pricing until 08/30/2011)**

5 Yr Fixed:         3.000% @ .875/pts              3.250% @ 0/pts

30 Yr Fixed:      4.500% @ .250/pts              4.625% @ 0/pts

Non Conforming to $2,000,000

5 Yr Fixed:         3.375% @ .625pts               3.500% @ 0/pts

30 Yr Fixed:      4.750% @ .625/pts               4.875% @ 0/pts

FHA Fixed to $625,500

30 Yr Fixed:        4.250% @ .625/pts            4.500% @ 0/pts