My friend Jeff Belonger offers his insight and expertise as a mortgage professional in this enlightening post on the current state of mortgage interest rates and where they may be trending!
Mortgage Interest Rates - They are becoming a big topic of conversation in recent weeks. About a month ago, there were many reports stating that rates will come down to 4.5%. And depending on how you look at it, we are just about there.
This is all based on a FHA mortgage ..... (Conventional rates are about 1/2 pt worse and even more so, depending on your credit scores)
4.50% would cost any where from 1 3/4 pts to 2 3/4 pts, depending on your loan amount and the state that you live in.
5.00% would cost any where from zero points to 1 pt, again, depending on your loan amount and the state that you live in.
So what is the deal? Yes, rates are very low. The MBS's (mortgage backed securities) are being bought by government funds, which have driven the rates lower. But in my honest opinion, I don't see them staying low for any time long. Don't get use to this.
So here is the problem to where I see things. Again, the MBS's are being bought and in many cases, usually become stronger and more attractive, and this helps lower rates. The 4.5% coupon and the 5.0% coupon is very cheap right now, which you would think rates would be lower. Coupled with the fact that the stock market has been losing daily, except for a slight gain today. Also the 10 year yield rose slightly today, but for the week, has been lower than in previous weeks.
What does this mean? Typically when what was mentioned above happens, rates usually come down. But the problem with this is that they are the lowest in many years. And I don't see them staying low for any length of time. If I had to put a time frame on it, possibly staying low for 1 1/2 weeks, or maybe the possibility of a whole month. But that would be pushing it. What would be my reasons for rates to increase?
Jeff's reasons.... one of the basics is that we just can't sustain low rates for the long term. This will do more harm than good. Sure, it's helped refinances to increase in recent weeks. But the purchase market has slightly increased. More and more people seem to be sitting on the fence, waiting for rates to lower. PEOPLE... listen up.... if you had plans to buy, buy now, don't wait.
Conclusion : As mentioned, we can't sustain low rates. Consumer spending is slowing, yields will rise, and there is speculation that President - Elect Barack Obama will increase borrowing to record highs to pay for his economic rescue package. With all of that, you would have the risk of inflation rising. Low mortgage rates do not always jump start the economy. If people save a $100 here or there, it doesn't get replaced into our economy in areas that are most critical. Lowering your mortgage payment on your new home, should not mean that you buy more or bigger. It should allow you to save more, hence one of the reasons why we are in this mess. This is not a fluff post or to make you happy post. It's reality and we need to see past the low rates. This post should have read, rates possibly going up, but I wanted to get your attention.
If you have been thinking about refinancing, do it now. If it makes sense 3 weeks ago, do it now. If you are waiting for lower rates, I won't feel for you when rates do go up, when they increase. Don't buy because rates are down, buy because you can afford it and think of lower rates as a bonus... or that you won the lottery.
PS.... and if you want bragging rights amongst your neighbors, co-workers, and family... put that behind you and save money, don't lose money. Besides, every borrower is different, because of credit score & LTV (loan to value), so one rate will be different than the other. That is just a fact. Don't be left behind because you wanted to brag the loudest, be a winner in your own world.
For two other good posts that give some other insights to what I didn't talk about, please read these :
- Market Direction with common sense explanation by : Larry Bettag
- Mortgage Rates Report - January 14th, 2009 by : Brian Brady
- The Rate/waiting game by : Jason Sardi
- FHA Loans - USDA Loans - Conventional Loans - VA Loans - Mortgages -
Experience & Knowledge at its BEST !!!
For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2008-2009 Tax Credit for First Time Homebuyers : 2008 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!
Copyright © 2009 by Jeff Belonger