topic Re: Mortgage rates rise to highest level in 7 weeks in Mortgage Loans

Rates were lowered - why the HECK are they going up for Mortgage?

Anonymous — Tue, 26 Feb 2008 11:33:53 GMT

This is the banks trying to regain some of their losses? What the heck - mortgage rates jumped to 6.0% in ONE week - Shane what the heck is going on?!!!!!!!!!

Thanks!

Re: Rates were lowered - why the HECK are they going up for Mortgage?

Anonymous — Tue, 26 Feb 2008 15:23:14 GMT

I am wondering the same thing. I applied for pre-approval like two weeks ago and they were below or right at 6%. Now I see they are moving up! Why?

Re: Rates were lowered - why the HECK are they going up for Mortgage?

Anonymous — Tue, 26 Feb 2008 15:28:14 GMT

Yeah, mine a week ago was 5.375 - now it's at 6 and of course I put an offer in Sunday night but haven't locked...SHANE - is it just the greed of the banks now to keep those homes ON THE MARKET? People will get rate increased to death and be unable to buy what they could have... what a game this lovely finance world is

Mortgage rates rise to highest level in 7 weeks

MidnightVoice — Tue, 26 Feb 2008 15:37:27 GMT

http://www.msnbc.msn.com/id/7148582/

Rates on 30-year mortgages rose to the highest level in seven weeks, breaking above the 6 percent level.

Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages averaged 6.04 percent this week, up from 5.72 percent last week.......................

However, increased worries about inflation have pushed long-term rates higher in the past two weeks. However, one-year adjustable-rate mortgages are still about one-half percentage point lower than at the start of the year, reflecting the aggressive rate cuts engineered by the Federal Reserve in January in an effort to combat the economic slowdown.

“As the spread between long-term fixed-rates and adjustable-rates widens, it is possible we could see a slight increase in the popularity of adjustable-rate mortgages,” said Frank Nothaft, chief economist at Freddie Mac.

In other rate moves this week, rates on 15-year mortgages, a popular choice for refinancing, edged up to 5.64 percent, compared to 5.25 percent last week. Rates on five-year adjustable-rate mortgages rose to 5.37 percent, up from 5.19 percent last week.

Re: Mortgage rates rise to highest level in 7 weeks

Anonymous — Tue, 26 Feb 2008 16:24:58 GMT

Cripe - I hate to say it but I'm starting to wonder if I should go with a 5/1 ARM and read all the fine print! This is ridiculous!!! They say the foreclosures soared in January - what the heck?!!

Seriously frustrating as one who finally made it to gaining my first home, I was thrilled w/the rate now I'm feeling I'm sure others do too, just seems wild, as is the economy I know!

Re: Mortgage rates rise to highest level in 7 weeks

ShanetheMortgageMan — Tue, 26 Feb 2008 18:05:18 GMT

I'd only go with a 5/1 ARM if you are putting a significant amount down, going to pay the mortgage balance down quite a bit, or were planning on coming into a windfall of money. If you aren't putting much money down, and aren't planning on paying the mortgage down quite a bit, or aren't coming into a large sum of money, and are planning on staying in the home for awhile, then a 30-year fixed would be my recommendation. You don't want to become another casualty of a rate adjustment on an ARM, be upside down on your home, and have no ability to refinance... wouldn't want to put all of your eggs in one basket and count on a loan modification.

Here is a video explaining the recent run up in interest rates

http://www.cnbc.com/id/15840232?video=655830354&play=1

If I was fianancing or refinancing my own home, even though rates are on the high side compared to recent weeks, I would lock rates in... I'm pretty conservative with my own money though. Someone with less aversion to risk might say if you can hold off now, rates will be lower in the future... which is likely true... there has never been a time in history that rates didn't go down after they've gone up, and they've always come up after they've gone down. But does that mean you sit on the sideline for weeks/months before that will happen? It's your call. Keep in mind the interest rates now were no higher than they were before MLK Jr Day, people just get spoiled by a huge drop in rates, make plans based on the those lower rates & payments... it's kind of like what happened in the real estate market, everyone saw the artificial gains in home value appreciation and had to jump on buying a home without any regards to what would be best for their long term plan. Think conservatively, plan for the worst, and you won't be dissapointed.

My recommendation is do what is best for you and your family, if it means you lock in an interest rate that isn't like your neighbors 5.25% rate, then so be it... if it means you take a gamble to see if rates will come back down, but if they don't, you'll be accepting a 6.5%, 7%, etc. rate, then that can be fine too if you are OK with it. Just because you don't lock in a super low interest doesn't make you any less smart, it just means the timing wasn't right for you.

Re: Mortgage rates rise to highest level in 7 weeks

Anonymous — Wed, 27 Feb 2008 00:27:36 GMT

Great video Shane. I guess that I am one lucky person, I did manage to lock my refi rate. I did it on the advice of my Broker. It ended up being 5.375% for a 30 year fixed rate mortgage.

The only piece of advice I will mention here is very simple. You see, I am a fairly educated person. So is my wife, in fact she is probably smarter than I. But neither of us truly know the mortgage industry and therefore, we tend to A) find a solid professional, B) review their work, and C) seek references. With that said, we tend to try to follow their advice.

In the above case, our broker started telling me on the 18 Jan 2008 that I would probably want to consider locking in our rate soon. I asked him a series of question which he answered and then he suggested that I do a little reading which I did that weekend. On the afternoon of 21 Jan 2008, I told him to proceed to lock our rate in when he felt it was time. He did so on 24 Jan 2008. I can't complain about his work, he did right by me and my family.

Re: Rates were lowered - why the HECK are they going up for Mortgage?

Anonymous — Wed, 27 Feb 2008 00:37:24 GMT

Mortgage rates are not tied directly to prime but to T-Bills (usually 30 year) and some other indexes... when prime goes down t-bill rate usually goes up...

Each mortgage/lender can have different programs tied to different things - it keeps their spread intact (when one goes down the other usually goes up)

Re: Mortgage rates rise to highest level in 7 weeks

Anonymous — Wed, 27 Feb 2008 11:51:36 GMT

Thank you Shane for the great advice. It is true, the timing was just off. I see now they expect a rate cut again in March, but it doesn't necessarily mean the house we may want will still be around.

I don't expect any windfall, and this is my first home so no, not much of DP at all, utilizing the programs available to me.

Re: Rates were lowered - why the HECK are they going up for Mortgage?

Anonymous — Thu, 28 Feb 2008 16:48:10 GMT

Just to clarify a little bit on what Lady_Scarlet stated about what mortgage rates are based upon.

Mortgage rates are directly tied to mortgage backed securities (MBS). While the 10 yr treasury yield will often move similarly to mortgage backed securities, 30 year fixed mortgage rates are not directly tied to the 10 year (that is a common misconception).

As has been pointed out here, MBS react in large part to concerns about inflation among other things. It is interesting to note that historically we usually see MBS rise as lower term rates come down (when the fed cuts rates). This is because of the impact on the dollar and the concerns for inflation that are produced by the weakening dollar. So, when the fed cuts, we usually see rises in MBS and thus mortgage rates. I know it sounds counter-intuitive, but it is true.

By the way, MBS have been VERY volatile lately. Today alone, we have a 78bps increase in MBS so far today (11:47AM EST).

Re: Rates were lowered - why the HECK are they going up for Mortgage?

Anonymous — Sun, 23 Mar 2008 03:26:08 GMT

The general public is made up of fools. This is just yet another way of financial institutions have a federally sanctioned right to screw people over. Their cost for funds has dropped significantly, and yet they are raising the rates. Don't let them fool you and try to use smoke and mirrors. The more interest rates charged by the fed go down, the more money they make, even if they held rates constant instead of lowering them. There is NO justification for raising interest rates on mortgages..NONE. You wonder why people take adjustable rate mortgages? Because they won't qualify for the home they want because of the rise in interest rates. And Congress and the government continue to allow this. I'm sorry, but if the Fed cuts rates, they banks should be FORCED to cut rates. You (banks) can't have it both ways. You say they are losing money because of all the mortgage defaults DUE TO RISING INTEREST RATES -, and yet you are doing nothing to prevent many people from having to choose their only way to get a home, which is through an adjustable rate mortgage. Some people never learn. Hypocrasy is always alive and well.

Kinda like justifying charging a higher interest rate because one spouse has a lower fico score, instead of doing the more mathematically CORRECT method of averaging the score. Some people argue that its because of risk and the ASSUMPTION which is probably incorrect. If they want to argue that everyone should suffer a higher rate because SOME couples scores may go down instead of up, then fine. Charge me a higher rate. But then at the end of a year, when I/WE have shown to you that you were wrong to begin with, you (the bank) should be forced to lower that rate to what it should have been at the time the loan was originated based on our averaged scores. We should only be charged a higher rate if our behavior did IN FACTmirror what you said it would. If not, again, you took advantage of us. Thats the reality of it.

Re: Mortgage rates rise to highest level in 7 weeks

Anonymous — Sun, 23 Mar 2008 03:56:47 GMT

tpgusmc,

My husband is getting ready to retire at E8/20 yrs. May I ask a little more info about your mortgage man? Esp if you're on the East Coast.

Re: Mortgage rates rise to highest level in 7 weeks

Anonymous — Sun, 23 Mar 2008 20:36:07 GMT

hate to break it to yous, but the federal rates is not related to the mortgage rate. mortgage rate is based on the 10 year bond rate. http://library.hsh.com/read_article-hsh.asp?row_id=85 http://www.investopedia.com/articles/pf/07/mortgage_rate.asp http://library.hsh.com/read_article-hsh.asp?row_id=85

Message Edited by Lamini on 03-23-2008 01:36 PM

Re: Rates were lowered - why the HECK are they going up for Mortgage?

Anonymous — Mon, 24 Mar 2008 17:06:45 GMT

I have a statement and a question. First, wedding08, the interest rate that was cut was that which they charge banks when they borrow money from the fed. Banks do not borrow money from the fed to fund mortgages. They underwrite a mortgage for, say, $150,000, then turn around and sell it to the highest bidder for a profit (for perhaps $160,000). That bidder then takes care of the loan and gets paid all of the interest. This works because if the banks had to borrow money from the fed to fund their loans, then interest rates would be substantially higher. The reason for this is that banks can only have so much money in loans on the books in relation to their deposits, which would put a hard cap on how much they could lend. This would result in only a small supply of mortgages (and other loans) being made available to the public. There would still likely be a demand for housing, even in this scenario. Simple supply and demand economics show that if there is substantial demand, but minimal supply, the price (interest rate) will go up. When the banks sell their loans to the highest bidder, they get the loans off the books (which helps their loan to deposit ratio), and get hard cash which will allow them to make another loan (without borrowing from the fed and having to pay interest on that money).

Now my question, does anyone know of any mortgage backed securities that I could by stock in??

Re: Rates were lowered - why the HECK are they going up for Mortgage?

Anonymous — Mon, 24 Mar 2008 21:21:21 GMT

wedding08 wrote:
Their cost for funds has dropped significantly, and yet they are raising the rates. Don't let them fool you and try to use smoke and mirrors.

Keep in mind that many of the well publicized interest rate drops are on OVERNIGHT loans. Worst case for a mortgage lender is they have to guarantee the rate for 30 (or in some cases now, 40) YEARS. I know I wouldn't lend someone a significant amount of money promising the same rate for that length of time without the rate being a good bit higher than what I thought the inflation rate would be regardless of what the Fed was saying.