Americans Gambling on Rates With Most ARMs Since 2008

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Americans Gambling on Rates With Most ARMs Since 2008

Housing TrackBy Kathleen M. Howley & Prashant Gopal - Jung Lim plans to offset the cost of rising mortgage rates by using an adjustable-rate loan to buy a home for his expanding family. For the California endodontist, the money he'll save makes up for the ARM's risky reputation.
Lim, 38, whose wife is expecting a second child in December, is leaving a two-bedroom condo in Los Angeles's Hancock Park to buy a four-bedroom house in the city's Sherman Oaks neighborhood for $1.12 million. His lender offered him a rate for an adjustable mortgage that is about a percentage point cheaper than a fixed loan. >>Read More in Bloomberg
July 29, 2013  :8:00 AM PST 


What happened last week?

Mortgage backed securities (MBS) lost -49  basis points from last Friday's close which caused 30 year fixed rates to move higher.  This ended the bond rally that had lasted for the two weeks prior to last week.

We had a spread of 124 basis points between our highs and lows of the week. 

As we have discussed, MBS sell off when there is positive economic news.  We certainly could have sold off even more given last week's data with Durable Goods Orders much stronger than expected (4.2 vs 0.5) and the Consumer Sentiment Index rising from 84.1 to 85.1.  Existing Home Sales missed the market expectations but was still robust.  New Home Sales enjoyed some nice gains in terms of unit sales and price increases.

Demand for our 7 year Treasury auction saw some decent demand but our 5 year and 2 year auctions saw decreased demand.

MBS would have lost more ground (even higher rates for you) if it weren't for a WSJ article that speculated that the Fed would change their language at this week's FOMC meeting to calm the markets that they would not be increasing their rates for a long time.  We agree.  They will certainly leave their Fed Funds rate alone but they will eventually have to start to pull back on bond purchases and those bond purchases are what impacts your mortgage rates...not their Fed Fund rate.


7 Day Mortgage Interest Rate lock or Float Advice: LOCK

The cost for a 4.00% rate based on Mortgage Backed Securities is up 0.01 point.

30 Day Mortgage Interest Rate Lock or Float Advice:  LOCK 



  • National Average for 30-Yr Fixed Mortgage Rate declined to 4.31% on July 25.
  • MBS (3.5%) Currently 100.85, High: 100.98, Low: 100.7
  • DJI Stocks currently $15,520.50, Down $-38.33, Change -0.247%
  • Asian & European Stock Market Indexes changed -0.961%
  • Crude Oil (WTI) Currently $104.31 - Change -0.37%
  • Gold 1 Once - $1,329.80

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