Mortgage Rates continue to fall
This was the sixth week in a string be 30 time credit toll knock down or seized fixed. In the last 6 weeks 30 year notes have fallen from 6.63 to 6.35. This was preceded by a abrupt leap in concentration tax in July where 30 year mortgage interest rates rose from 6.26 to 6.63 between July 17th and July 24th. So whilst duty are slight advanced nowadays than what we proverb on July 17th they have almost fallen back to mid July levels. It’s interesting to note that it took one week for rates to jump from 6.26 to 6.63 and six weeks of falling rates to get close to the July 17th levels.
Decrease in the mortgage products
This week we also saw decreases in all the other major mortgage products. The 15 year mortgage fell from 5.93 to 5.9 and the 5 year arm fell from 6.03 to 5.97. By far the biggest mover was 1 year arms which fell almost 1/5 of a point moving from 5.33 to 5.15. Below are rates for the 4 major mortgage products this week.September 4, 2008 ,30-yr 6.35 15-yr 5.90 5-yr ARM 5.97 1-yr ARM 5.15
Calculation of the rates
Ok so what does this mean for a mortgage? Obviously ones mortgage would be lower with falling rates but by how much. Let’s look at a 200k mortgage and using our free mortgage calculator lets fun the numbers based on today’s rates.September 4th
5-yr ARM $1195.24
1-yr ARM $1092.05
So why have rates steadily fallen. I think it has to be based on rumors (which have now proven to be correct) that the federal government is going to takeover Fannie Mae and Freddie Mac. Basically the government takeover provides more assurance to banks that their mortgage insurance is going to be paid out in case of default. The declining fortunes of Freddie Mac spooked some banks into thinking their mortgage insurance was possibly worthless. So now banks are lowering rates because in their view the risk associated with the loans has gone down.
what do I expect to see over the next few months? I would be surprised if mortgage rates don’t continue to fall now that Freddie Mac and Fannie Mae are owned by the government. The Fed has been trying to push down interest rates all year and now they have the means to do so (I think this was part of the motivation behind the takeover of Freddie Mac and Fannie Mae). So does this mean investors? Should they wait for mortgage rates to drop before buying? I don’t think so. If rates continue to fall real estate prices could rise or at least I would expect to see less deals sitting on the market. Instead if you find a property to purchase I would watch interest rates and if they continue to So fall I would try and relock your mortgage rate at the new lower rate. While I expect rates to fall something unexpected that spooks banks over the next month could of course push mortgage rates back up.