Rates as of 7/30/10
7:45am update: Now mortgage security rates and stocks are slightly up on the day after being moderately down in early trading.
7:10am post: Mortgage security rates are slightly lower on the day athough higher than early this a.m. as rates continue to hit new historic lows. Long term Treasusry rates are moderately lower. Stocks are down.2% recovering from early losses. The Chicago PMI and Consumer Sentiment rpts were better than expected although still weak. Earlier the 2nd Q GDP was 2.4% annual growth down from 3.7% in Q1; Q1 growth was revised up from the previous 2.7% estimated growth rate. The Q2 growth was as expected but the markets reacted to push rates and stocks lower on the news.(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
NO PTS ON CONFORMING 1 PT ON JUMBO
| Product |
Conforming |
Jumbo |
| 30 year |
4.375% |
5.5% |
| 15 year |
3.75% |
5.125% |
| 20 year |
4.25% |
5.5% |
SUPER CONFORMING 30yrfixed 4.5% no pts.
5/1 ARM 3.125%with 0 pts, 3.0% with .5pts
Conforming above $417k to $729,750 in most counties
Adjustable Rate Mortgages (ARMs)
No pts on conforming 1 point on jumbo
| Product |
Conforming |
Jumbo |
|
monthly ARMs no neg amort. fully indexed |
n/a
|
n/a
|
| 3/1 |
3.25% |
4.0% |
| 5/1 |
3.00% |
4.125% |
| 7/1 |
3.25% |
4.5% |
| 10/1 |
4.25% |
5.0% |
(all rates subject to rate adds for less than excellent FICO scores, higher LTVs, loan amount adjustments and for Cash out)____________________
RATE OUTLOOK (cont.)
Mortgage rates came down sharply beginning in 11/08 as the Fed acted for the first time in history to directly lower mortgage rates by buying mortgage securities. On 12/17 and 3/18/09 rates plunged following Fed announcements of programs to buy more mortgage securities with the intent of lowering mortgage rates. Rates spiked .75% in late May and early June. But rates improved in mid 6/09 as doubts arose as to how strong the recovery would be. Mortgage rates stayed in a relatively narrow .25% range during the summer but improved in the fall to get back near the spring lows in early Oct. and in late Nov. hit new lows before moving up a bit in 12/09. Rates have moved down a bit just above the 11/09 lows, were pretty stable in 2010 until 3/24 when rates spiked as the Fed ended their mortgage security purchase program. When the Euro debt crisis flaired in the spring rates steadily declined to hit new all time lows in late June before going even lower in July.
If you can save significantly at current rates they should not be passed up. Timing the very bottom or top of any market is 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.
Long term interest rates, including mortgages, are controlled by daily trading in the bond market. The bond market actions most often preceed the Fed as the market participants 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. We can expect that long term rates will rise before the Fed starts to raise the short term rates. Additionally the Fed's $1.25 Trillion program to purchase Mortgage Backed Securities ended in 3/10. This program probably gave us lows that were .5% lower than they would otherwise have been . Also to consider is that the Fed is likely to sell the $1.25T of mortgage securities they now have on their books at some point that will have the impact of raising mortgage rates in future years.
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 more influenced by the Fed's handling of short term interest rates than the long term fixed mortgages are. Jumbo intermediate term loans are about 1% 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% since the 12/16/08 Fed rate cut, so prime tied HELOCs are very cheap money after having spiked to over 8% three 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 cut short term interest rates by 5% from 9/07 to 12/08 when the Fed Fund rate was lowered to essentially 0%. This left the Fed using other innovative programs to further stimulate the economy. The next Fed meeting is 8/10/10. In the first half of 2010 The Fed unwound emergency stimulus programs that provided extraordinary liquidity to financial institutions and markets. But the Fed is not expected to begin raising rates until the recovery is well established which probably will not be until mid 2011.
Inflation continues to be low with the CPI showing consumer prices rising 2.1% in the last 12 mos. with the core rate being 1.3%. Annual core inflation (without energy and food) was 1.8% in both 2008 & 2009, within the Fed's target of 1.0%-2.0% Total inflation was 2.7% in '09 after being only .1% in '08. Inflation is not an immediate concern as there has been huge asset deflation in housing. The Fed & gov't moves to fight this will be inflationary in the long run. But the slowly growing economy should keep inflation controlled over the next year until the economy starts to grow at a good pace.
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 but beginning in 2011 will be exposed to the possibility of sharply higher rates.
Call for information on additional products. Rates are subject to change. Call to confirm current rates. |