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4.5% interest rates - Myth or Reality - Part II

By Dave Andrews

Mortgage and Lending with Landover Mortgage

December 10, 2008 08:28 AM

Hello, your Red Headed Mortgage Guy, Dave offering some interesting information.

A few days ago I discussed the story that was in the news about 4.5% interest rates.

In my article I forgot to mention that the "original" story was referring to 4.5% interest rates for "purchases" of homes to stimulate the economy.

Well, today I was quoting 4.875% on a 30 year fixed rate loan at 1 point + fees (APR @ 5.25%) - of course this rate was for good credit, good equity, and good income and assets to support the new, LOW payment. This is a "real" 30 year fixed rate loan...no adjustments in 3 or 5 or 7 years down the road. This applies to someone purchasing OR refinancing.

This just goes to show that anything is possible...at least almost. A month ago I was quoting 6.5% interest rates on a 30 yr. Fixed rate loan. As I said the other day, who knows if we will get to 4.5% on 30 yr. Fixed rates, but it's looking a lot more like "reality" than it was a few weeks ago.

Several of my clients have been asking me what they should do if they got into their loan 3 or 4 years ago. I advise them that one option is to apply a part of the monthly savings they would see from refinancing and apply it to the principal balance for a few years. This would allow them to catch up to the original loan they paid off and get them back on track to paying the loan off in less than 30 years. There are people that say this is not a wise option. I'm just saying it is "one" option and everyone's goals are different.

Here's a video I did for my friends, clients and agents. I hope you enjoy.

https://www.thinkbigworksmall.com/public/showArchiveVideo/1249/3207

You can leave comments on the video.

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June Piper-Brandon

Coldwell Banker Realty - Baltimore, MD

Creating Generational Wealth Through Homeownership

It might well be a reality, however, if people wait for those rates they may find that the price of homes are back on the rise so the amount they save in their interest rate will be negated by the positive increase in the price of homes.

Dec 10, 2008 08:33 AM

Layla Masset

Keller Williams Performance Realty - Pueblo, CO

I had a buyer today, that was told about a 4.75% interest rate but they would have to pay so much in points, that it really doesnt give them a cheaper payment. Anyone else hear that?

Dec 10, 2008 08:49 AM

Lane Bailey

Century 21 Results Realty - Suwanee, GA

Realtor & Car Guy

I'm curious as to what is going to happen with interest rates. If things don't pick up, I think we might see natural no-points rates very close to that.

Dec 10, 2008 08:53 AM

Dave Andrews

Landover Mortgage - Gig Harbor, WA

To Layla: I didn't see that big a difference in the 4.875% rate vs. the 4.75% rates today (about .5%). I don't understand how a "buyer" would not see a better payment. Someone refinancing might not see a better payment by adding the fees and points into the loan amount, but a buyer is paying everything up front.

Dec 10, 2008 09:12 AM

To Lane: We'll never see interest rates at zero for home loans, because the lenders need to make money on what they borrow. THEY may borrow at zero, and we are edging closer to that "reality" with each Fed rate cut, however they won't pass that along like in car loans.

I stopped predicting the direction of interest rates earlier this year. The market is too volatile. In fact, I spoke to my corporate office today, because mortgage backed securities improved throughout the day, however earlier in the day the lenders were repricing for the worst. This is something they do to slow down the rate of incoming loans.

This is one reason I'm saying 4.5% is a possibility, however the lenders will ease us to that level, not drop us like they did before Thanksgiving when they went from high 5's to low 5's in one day. That little drop took new loan applications up 200+%.

Dec 10, 2008 09:18 AM

No points... No discount points. What I was saying is that we may soon see people getitng 4.5% rates without paying discount points.

Dec 12, 2008 12:16 PM

4.5% interest rates - Myth or Reality - Part II

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