What I’m seeing:
- 30 yr fixed rates at 5.25%.
- 15 yr fixed at 4.75%
If you are considering refinancing, call your loan officer. Although our office is in escrow, not lending, we work with many resources for lending. If you don’t have a resource or would like to at least do shopping comparisons, please let me know. You can contact me offline.
vboring » Jan 15, 2008 at 9:08 am
if the Fed cuts the reserve rate by .5% to .75% as is expected at their next meeting, won’t that lead to lower prime rates?
notabull » Jan 15, 2008 at 9:13 am
Yes, but that doesn’t necessarily equate to lower fixed rate mortgage rates. These are linked to the interest rates on longer term bonds and other stuff I don’t fully understand.
The only “mortgage” that’s tied to the prime rate is the HELOC – Home Equity Line of Credit. A lot of people have these as their second mortgage.
“Prime” rates are not the same thing as “fixed rate mortgage rates for *prime* borrowers”…
budbrad » Jan 15, 2008 at 9:25 am
Mortgage salespeople are not much different than housing salespeople.
It’s always a good time to XXXX.
However, one can reasonably assume that if a) the fed rates will be cut, and b) the supply of transactions is decreasing, then mortgage rates will also fall.
S-Crow » Jan 15, 2008 at 9:55 am
Budbrad,
This is an area in which I’ve been terribly wrong over the last year. I really never expected rates to go back down to these levels.
michael » Jan 15, 2008 at 9:58 am
We had a discussion a little while ago about the ultrashort ETFs for financials and real estate. You should check the numbers today (SRS and SKF). They look like dot com IPOs in 1998.
Wow real estate really is making someone rich.
David McManus » Jan 15, 2008 at 10:25 am
In negotiations as we speak :-)
David McManus » Jan 15, 2008 at 10:27 am
michael,
Yeah, I’ve made tons with SRS and short positions on WM, CFC, SBUX & C this year. Other folks I know are complaining about the market, but I’ve just got a big smile on my face. :-)
Alan » Jan 15, 2008 at 10:29 am
If only I could get a large loan with this rate on something that I didn’t believe was going to lose a large amount of value in the near future.
Alan » Jan 15, 2008 at 10:30 am
Might low rates be an indicator that the market expects deflation?
michael » Jan 15, 2008 at 10:42 am
“David McManus”
I put a lot into SRS and SKF against the sage advice of my broker. I didn’t short the banks because those people are such rotten a**holes I figured that they would just create more lucrative bank fees to fill the hole in their balance sheets.
My family just got out of a big legal battle with one of the banks. They tried to steal my 91 year old grandmothers money. They charged her huge fees on a small trust that was set up by my great grandfather to taker care of her in her retirement. They charged her eight or nine thousand a year to administer her account and then refused to transfer the account when we tried to move it saying we didn’t have the legal right. The bastards lost because we have lawyers in the family and now my grandma has her money. I’m betting this is a new bank strategy aimed at the elderly who are the least likely to fight back.
Sniglet » Jan 15, 2008 at 10:44 am
It’s possible that mortgage rates could drop even further over the next couple years EVEN as the broader real-estate market implodes. Central banks will keep dropping rates to try and stimulate the economy, and demand for treasuries will increase as more and more people try to flee to safety.
The kicker is that qualifying for financing will likely continue to get much harder, with tightening critieria. Further, increasing numbers of people may find it impossible to refinance as property prices continue to fall leaving them with negative equity.
So, yes, mortgage rates may be lower in Januay 2008 than they are today but you may not be able to qualify.
Gary » Jan 15, 2008 at 11:01 am
You have GOT to go to john l scotts website they have the ” why now is a smart time to buy” book right on the front page.
patient » Jan 15, 2008 at 11:10 am
The current fixed rates are undoubtly low. I think about as low as they will go. We haven’t had a housing bubble like this before but we have had recessions, inflation, deflation, low dollar, high dollar, stock market bubbles and crashes but the 30y fixed that is determined by economic factors like these have never been much lower. Look at the last 30 year fixed rate mortgage rates on the last graph from the bottom on this webpage for example:
http://www.mortgage-x.com/trends.htm
So, if the current rates do not kickstart the housing market I don’t think anything will. My guess? It will not make a significant impact, affordability is still way,way,way out of line with fundamentals.
Buceri » Jan 15, 2008 at 11:18 am
I agree with Sniglet –
On top of the new qualification requirements, 5% on a $300K loan is still a ton of money.
patient » Jan 15, 2008 at 11:21 am
Sorry, that should be the second last graph from the bottom. The one that goes back to 1971. 5% is about as low as th fixed rate has been the last 30 years thorugh all different kinds of economic turbulences. So the chance of it getting much lower is probably pretty low.
Angie » Jan 15, 2008 at 11:27 am
But rather less than 6 or 7% would–will?–be.
Alan » Jan 15, 2008 at 11:35 am
a) 1300 sqft house. $400k sale. $100k down. $300k loan @ 5% = $1250 interest/month
b) 1300 sqft house. $200k sale. $100k down. $100k loan at 7$ = $583 interest/month.
patient » Jan 15, 2008 at 11:53 am
Alan, that’s the kind of calculations you wish more people would do. Nothing beats a low purchase price in the long run. Interest rates can be changed by refinancing but the purchase price can’t.
vboring » Jan 15, 2008 at 11:53 am
anyone know what happened to mortgage interest rates and lending standards in Japan during their deflationary period?
if you expect helicopter Ben to force inflation or hyperinflation, a house loan may be a good bet. the home will lose real value, but possibly much less so than your payments on the loan for it.
if you think deflation is inevitable, then you haven’t read this analysis, including a paper written by helicopter Ben:
“We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.” -Ben
http://seekingalpha.com/article/60261-all-signs-point-to-more-inflation
it points to a perfect storm situation for hyperinflation.
maybe now is a good time to buy, if you think your income is recession-proof.
Scuba Steve » Jan 15, 2008 at 12:04 pm
5% on a 300K loan is a lot… it still leaves me wondering what all in the Seattle area you could pick up for that much.
I’ve been following a particular zip code I may be moving into closely since early November. Seen a lot of houses move off the MLS unsold and plenty of places that look to be foreclosures along with a couple of people that delisted and popped back up again. I see the most price dropping activity in the lower-end of the scale though. Hope it spreads into what regular folk would be interested in soon. For what it’s worth, I see late ‘05 price levels for smaller houses but the normal and large places still haven’t dropped as much.
Rhonda Porter » Jan 15, 2008 at 2:39 pm
It will be interesting to see where rates will be tomorrow after the release of the CPI. I’ve been contacting my clients all day and I’m afraid by the time they decide to get off the fence, the rate will be gone.
Angie » Jan 15, 2008 at 3:04 pm
Nothing beats a low purchase price in the long run.
True. The $64K question is, will that 1300sf place that’s going for $400K now ever really get down to $200K? I still think youse guys are dreaming.
Erik » Jan 15, 2008 at 3:23 pm
If it gets to $300K then Alan will still be much better off.
Alan » Jan 15, 2008 at 3:28 pm
Rhonda, Is there any way someone could get a mortgage at today’s rates without actually owning property? Maybe the money could be put into a CD or something as collateral and pulled out for a future RE purchase. Maybe you would have to pay 1% difference in the mean time, but that might be worth it.
Rhonda Porter » Jan 15, 2008 at 3:48 pm
Alan, you need to own property. The mortgage (actually it’s a Deed of Trust) is recorded against the property, which is the security for the loan.
If someone is actively looking for a property, they can “lock and shop”. The rate is slightly higher though than the current rate of having a property associated with the lock.
Brian » Jan 15, 2008 at 4:43 pm
I can’t believe 10-year treasuries are at 3.7%. I thought these levels were gone after we left the 2002 economy behind us. Why would you lock in a measly 3.7% return for 10 years?
On the other hand, it is earnings week for stocks, so if things go poorly, it could just keep dropping. Intel’s bad news today will probably make it go down more tomorrow.
http://finance.yahoo.com/charts#chart1:symbol=^tnx
Matthew » Jan 15, 2008 at 5:39 pm
Brian,
Start believing buddy, this is just the tip of the spear.
notabull » Jan 15, 2008 at 5:52 pm
“Why would you lock in a measly 3.7% return for 10 years”
Firstly, it’s safe. Unless you believe in hoarding gold, of course. If so, nothing will be safe enough for you. But if you’re an investor with millions of dollars to take off the table and put somewhere, where are you going to put it? Countrywide CDs? As money comes out of stocks it has to go somewhere…
In addition, I’m thinking that the medium term expectations for inflation are that it will decrease. It may be high-ish right now, but as the economy tips into recession (if it’s not there already) the conversation will slowly move to *deflation* and not inflation.
Sure, the Fed is going to drop their rates and this is often inflationary, but they’re doing it because they believe that growth will slow dramatically. Ultimately, this is deflationary.
wreckingbull » Jan 15, 2008 at 6:04 pm
Why would you lock in a measly 3.7% return for 10 years
To properly diversify a portfolio.
It is a hedge against a true deflationary scenario across all asset classes. I can think of some scenarios where having some skin in that 3.7% return could be the difference between poor performing investments and complete financial destruction. Will it happen? Who knows. That’s why you diversify.
disbelief » Jan 15, 2008 at 6:35 pm
“The $64K question is, will that 1300sf place that’s going for $400K now ever really get down to $200K? I still think youse guys are dreaming”.
What if it where to go down to $300K? We’ll see what the future holds Angie :-)
Scotsman » Jan 15, 2008 at 6:40 pm
Rates will fall further.
Banks hate inflation, since they are repaid under inflationary conditions with dollars that are worth less than what they loaned out initially. Under deflationary conditions, banks are repaid with ever more valuable dollars, and win big.
The government hates inflation, since it pushes up interest rates, which increases the cost of borrowing. If you haven’t noticed, the federal government is currently a HUGE borrower in both domestic and international markets to fund the current war, deficit, and accumulated national debt. And, most of it’s transfer payments- social security, etc. are tied to COLA’s, which increases the cost of these already marginally solvent programs.
If you recognize that both the banks and the government hate inflation, what makes anyone think they will allow it to really take hold? They will work hard to achieve flat to modest price growth, with the dream of deflation on the horizon. This will be easy to do, since in a recession- which we are in- prices, and hence inflation, tend to stay flat or fall. Rates will go down, perhaps much further. In Japan, they went to a fraction of 1%.
Finally, the main driver of inflation is wage growth. Wages increase when labor productivity increases, allowing worker to be paid more, or when labor shortages occur. Unemployment in currently increasing. That is anti-inflationary. And while American productivity has increased slightly over the past 5 years, it hasn’t been that great, and hasn’t led to large wage increases.
When you see wages increasing 5-10% a year, and all your friends are getting huge raises, and everyone has a great job, THEN you can talk about inflation fears.
Tom » Jan 15, 2008 at 10:53 pm
Scotsman, I agree that we’re likely to see at least a bit of deflation in the near term, but I disagree with your statement that “the government hates inflation.” With all the debt the government has, massive inflation would be an easy way to reduce the pain of paying off that debt, especially if interest rates rise.
Scotsman » Jan 16, 2008 at 1:00 am
Tom- inflation leads to ever higher interest costs as rates continually readjust to price in the additional expected inflation. And since most of our debt is funded by foreign countries we have to maintain stability in the dollars value, or they won’t continue to “play ball” and buy the debt. While inflation seems like an easy way out it will never come into play on a large scale. There are too many restrictive parameters on how our debt gets funded, and the interplay of international currency values.
Swing Ninja » Jan 16, 2008 at 12:55 pm
Probably should ask if there’s 30-day guarantee kinda thing. Not sure what the name for it. When I refinanced my mortgage with BofA Portland 5 years ago, they gave me lower interest rate since during the process the rate got lowered.
Rhonda Porter » Jan 16, 2008 at 5:34 pm
Swing Ninja,
ask your Loan Originator if they can break the lock or if there’s a float down once you’re locked. Typically a float down means a slightly higher rate…but it may not.