Rates as of 7/3/09
The U.S. financial markets are closed until Monday for the holiday. Happy Independence Day!
Next week we have more Treasury auctions which will dominate the interest rate outlook.(more rate outlook analysis below) __________________________
30 day lock RATES with NO PPAY PENALTIES , NO POINTS on rates quoted unless otherwise noted. Lower rates available with points.
Fixed Rates @ 1 pt.
| Product |
Conforming |
Jumbo |
| 30 year |
5.00% |
6.375% |
| 15 year |
4.5% |
6.375% |
| 20 year |
4.875% |
6.375% |
SUPER CONFORMING 30yrfixed 5.375%no pts. or 5.125% with 1 pt
5/1 ARM 4.5%with 1 pt. or 5.00% no pts.
Conforming above $417k to $625,500 in most counties (increase back to $729,900 is coming)
Adjustable Rate Mortgages (ARMs)
rates @ NO points for conforming, @ 1 point for jumbo
| Product |
Conforming |
Jumbo |
|
monthly ARMs no neg amort. fully indexed |
n/a
|
n/a
|
| 3/1 |
4.875% |
5.25% |
| 5/1 |
4.75% |
5.625% |
| 7/1 |
5.125% |
6% |
| 10/1 |
5.5% |
6.125% |
(all rates subject to rate adds for less than excellent FICO scores, higher LTVs, loan amount adjustments and for Cash out)____________________
RATE OUTLOOK (cont.)
We had this incredible two month period thru 5/26 of mortgage rates being very stable at historical low rates. This was largely due to the Fed program to buy mortgage securities. But now the market doubts the Fed's willingness and ability to keep mortgage rates so low. The higher Treasury and Mortgage rates are related to concern over huge gov't borrowing and also all financial markets have gained due to a consensus that the economy is near the bottom of this recession and recovery is certain by year end. This puts the focus more on inflation and removes fear of deflation, Also there may be a seasonal component as the last two years (and 7 out of the last 10 years) have seen sharp rate increases in late May/early June that reversed later in the summer. These were due to similar inflation worries that turned around to have substantial rate improvement in the second half of the year
Rates came down sharply beginning in 11/08 as the Fed acted for the first time to lower mortgage rates by buying mortgage securities. On 12/17 and 3/18 rates plunged following Fed announcements of programs to buy more mortgage securities with the intent of lowering mortgage rates. Rates held steady until late May when mortgage rates began a 2 week rise of .75% before recovering about half of the increase in mid June.
When mortgage rates get to historical lows they are more likely to spike up then continue down. The few people who get the very best rates (Wed 12/17, Jan 6-8, 3/18, most of 4/09 & 5/09) were the borrowers who were in process waiting for the right moment to lock. If you save significantly at current rates they should not be passed up. Timing the very bottom or top of any market is very nearly impossible. If you do not have a good fixed rate it makes sense for almost everyone to get one at these historical low rates.
When the economy improves it could be many years before we see rates this low again especially because the actions to cure the crisis will almost certainly result in an inflation problem when the economy starts to grow again. With all the uncertainty it makes sense to have your rate locked in for as long as possible.
WHAT DRIVES LONG TERM INTEREST RATES?Long term rates including mortgage rates react mostly to the expectation for inflation over the next 10 years so long term rates DO NOT move directly with the short term rate changes. (See Frequently asked Question #1 to see graph of Fed Funds & mortgage rates). The bond market actions most often preceed the Fed as the markets are able to analyze the same data that the Fed sees. The law of supply and demand say increased borrowing from the gov't bailout of the financial system (as well as the huge budget deficit) will have an upward pressure on rates at some point when the economy recovers.
INTERMEDIATE TERM AND SHORT TERM RATES: Short term rates are driven largely by the Fed's actions. Intermediate term rates (3-7 yrs.) are in between and are much more influenced by the Fed's handling of short term interest rates. Recently the conforming intermediate term loan rates again dripped below the 30-yr. rates. Jumbo intermediate term loans have been far below the jumbo fixed rates because of some lenders willingness to hold the intermediate term loans in their portfolios.
The Prime Rate has been 3.25% after the 12/16/08 Fed cut, so prime tied HELOCs are very cheap money after having spiked to over 8% two years ago. Lender cutbacks have tightened the availability of this money significantly so it much harder to get a new HELOC and older HELOCs have had limits cut as property values drop.
The Fed has cut short term interest rates by 5% since 9/07. The next meeting is 6/24/09. The Fed can not cut rates since the rate they control is now at record lows just above zero. But the Fed continues to have tools to influence the economy.
Annual core inflation (without energy and food) has improved in recent months to be 1.8% which is within the Fed's target of 1.0%-2.0%. Total inflation is down to 1.3% over the last year due to falling energy prices. Inflation had been running over 5% just last year. Inflation with the weak economy and low oil prices. inflation is not an immediate concern as there is huge asset deflation in housing and stocks that threaten our economy. The Fed & gov't moves to fight this will be inflationary in the long run. But the slow economy should keep inflation controlled over the next year or two until the economy starts to grow.
Borrowers with adjustable mortgages tied to Treasury & LIBOR indices and lines of credit tied to prime will continue to be helped by the low short term interest rates. The LIBOR index which had risen last year has come back closer to Treasury rates.
Call for information on additional products. Rates are subject to change. Call to confirm current rates. |