Mortgage Rates Come Back Down To Earth
For the last few weeks the buzz in the real estate industry has been that rates are rising and that rates are going to go up even more
. So it was somewhat of a surprise to see rates plummet this week. The 30 year rate dropped from 5.21 to 5.07 this week. 5.07 marks the lowest point in March.The 15 year dropped even more falling from 4.52 to 4.40. The 5 and 1 year arms both dropped from 4.25 to 4.08 (5 year arm) and 4.14 to 4.13 (1 year arm). For the first time in several months the 1 Year arm is higher than the 5 year arm. This basically knocks out the 1 year arm as a viable product (although we have been recommending against it recently anyway). Below are rates from the weeks from Mar 18, 2010 to Apr 15, 2010
Apr 15, 2010
30-fixed 5.07 15-fixed 4.40 5 ARM 4.08 1 ARM 4.13
Apr 08, 2010
30-fixed 5.21 15-fixed 4.52 5 ARM 4.25 1 ARM 4.14
Apr 01, 2010
30-fixed 5.08 15-fixed 4.39 5 ARM 4.10 1 ARM 4.05
Mar 25, 2010
30-fixed 4.99 15-fixed 4.34 5 ARM 4.14 1 ARM 4.20
Mar 18, 2010
30-fixed 4.96 15-fixed 4.33 5 ARM 4.09 1 ARM 4.12
Oct 01, 2009
30-fixed 4.94 15-fixed 4.36 5 ARM 4.42 1 ARM 4.49
At least for now it looks like instead of rates moving into an era of higher rates we are moving into a period of volatility. It's also a welcome relief to buyers that were thinking they missed the party last week when rates started to rise.
In addition to interest rates is always good to look at actual mortgage payments. We took rates from April 15th and translated them into a 200k loan. Then we did the same thing with rates from April 8th and September 17, 2009 (6 months ago).
Apr 15
30-year $1082.21
15-year $1519.78
5-year ARM $964.07
1-year ARM $969.88
Apr 08
30-year $1099.45
15-year $1532.03
5-year ARM $983.87
1-year ARM $971.04
Sep 17
30-year $1078.53
15-year $1526.92
5-year ARM $1014.55
1-year ARM $1022.89
So compared to last week a home buyer would save around $17 a month for a drop of 1.56 percent. While not overwhelming $17 a month adds up over time ($204 a year or $6120 over 30 years).
So what do we expect moving forward? It looks like over the short term we should continue to see volatility. Since the government stopped buying mortgage backed securities we should expect to see mortgage rates bounce around this summer. At the same time over time we expect to see mortgage rates rise over the next year. The forces that have kept rates down for so long (a weak economy, government intervention) are coming to an end so mortgage rates can't stay below 6 forever.
by: Ki Gray