Archive for the ‘Mortgage Rates’ Category

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With LIBOR Low, Don’t Rush To Refinance Your ARM

Wednesday, May 9th, 2012

Pending ARM Adjustment

Is your mort­gage sched­uled to adjust this sea­son? You may want to let it. This year’s ARM-holding home­own­ers are find­ing out that an adjust­ing mort­gage may be the sim­plest way to get access to today’s low mort­gage rates — with­out pay­ing the clos­ing costs.

Cur­rently, con­ven­tional adjustable-rate mort­gages are adjust­ing to near 3.00 percent.

If your home is financed via an adjustable-rate mort­gage, you’re likely cog­nizant of your loan’s life-cycle. At first, your ARM’s ini­tial mort­gage rate is agreed upon between you and your lender, a rate that both par­ties agree will remain in place from any­where from one to 10 years, with peri­ods of five and seven years being most common.

Then, after the ini­tial “teaser rate” expires, the mortgage’s mort­gage rate adjusts accord­ing to a pre-determined for­mula — one that’s also agreed upon at clos­ing. The loan is then sub­ject to an iden­ti­cal mort­gage rate adjust­ment every 12 months there­after until the loan is paid in full.

The most com­mon con­form­ing mort­gage adjust­ment for­mula is to add 2.25 per­cent to the then-current 12-month LIBOR rate.

Today’s 12-month LIBOR is 1.05% so, as a real-life exam­ple, an adjustable-rate mort­gage that’s leav­ing its teaser rate period this week would adjust to 3.30%.

If you’re a home­owner who took a 7-year ARM in 2005, or a 5-year ARM in 2007, your newly-adjusted mort­gage rate should be roughly 2 per­cent lower than your ini­tial teaser rate. On a $250,000 mort­gage, a 2 per­cent mort­gage rate reduc­tion yields $298 in monthly savings.

There­fore, if you have an adjustable-rate mort­gage that’s due to reset, don’t rush to refi­nance it. For at least one more year, you can ben­e­fit from low mort­gage rates and low payments.

As for next year’s adjust­ment, how­ever, that’s anyone’s guess.

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What’s Ahead For Mortgage Rates This Week : May 7, 2012

Monday, May 7th, 2012

Unemployment RateAfter two weeks of no change, mort­gage mar­kets improved last week, push­ing mort­gage rates lower.

The major­ity of the improve­ments occurred Fri­day after the April jobs report failed to impress Wall Street, and after it became clear that the Eurozone’s strug­gles with sov­er­eign debt would continue.

Accord­ing to Fred­die Mac, con­form­ing 30-year fixed rate mort­gage rates fell to 3.84% nation­wide, on aver­age, for bor­row­ers will­ing to pay 0.8 dis­count points at clos­ing plus a full set of clos­ing costs. 

1 dis­count point is equal to 1 per­cent of your loan size such that one dis­count point on a $200,000 loan would require $2,000 to be paid at-closing.

Fred­die Mac’s reported rates for the bench­mark 30-year fixed rate mort­gage are the low­est in recorded history.

The 15-year fixed rate mort­gage is also at its low­est point in his­tory. Accord­ing to Fred­die Mac’s sur­vey, the 15-year fixed aver­aged 3.07% with 0.7 dis­count points last week. One year ago, the rate was 3.89%.

This week, with a data-sparse eco­nomic cal­en­dar, mort­gage mar­kets will likely take cues from events in Europe. Notably, France has elected a new leader, one that prefers growth over aus­ter­ity; and vot­ers in Greece have “pun­ished” austerity-backing lead­ers, in the process cre­at­ing a split par­lia­ment.

Each event adds uncer­tainty to an already unsta­ble eco­nomic envi­ron­ment and uncer­tainty favors U.S. rate shoppers.

Doubt spurs investors to seek “safe” assets and U.S. government-backed bonds — includ­ing mort­gage backed bonds — meet that criteria. As demand for mort­gage bonds rise, mort­gage rates tend to fall.

This week, rates are start­ing the week improved. Whether it’s a knee-jerk reac­tion to Euro­zone news from the week­end, or low rates are here to stay is tough to know. There­fore, if today’s mort­gage rates look good to you, con­sider lock­ing some­thing in. There’s more room for rates to rise than to fall.

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What’s Ahead For Mortgage Rates This Week : April 30, 2012

Monday, April 30th, 2012

Fed Funds RateMort­gage mar­kets were mostly unchanged last week for the sec­ond straight week. Spain made few moves to allay con­cerns from its investors, the Fed­eral Reserve did lit­tle to change its mes­sage on the U.S. econ­omy, and newly-released eco­nomic data was in-line with expectations.

Con­form­ing mort­gage rates idled last week, remain­ing near all-time lows for the 30-year fixed rate mort­gage, the 15-year fixed rate mort­gage; and the 5-year ARM.

Accord­ing to Fred­die Mac’s weekly mort­gage rate sur­vey, last week’s mort­gage rates, as aver­aged from more than 125 banks nation­wide, were as follows :

  • 30-year fixed rate mort­gage : 3.88% with 0.7 dis­count points
  • 15-year fixed rate mort­gage : 3.12% with 0.6 dis­count points
  • 5-year adjustable rate mort­gage : 2.85% with 0.6 dis­count points

A dis­count point is a one-time clos­ing cost and is equal to one per­cent of your over­all loan size. This means that a mort­gage appli­cant with a $100,000 mort­gage and an accom­pa­ny­ing 0.7 dis­count points would be respon­si­ble for pay­ing an upfront charge of $700 at the time of closing.

Fred­die Mac’s mort­gage rates assume full clos­ing costs, too.

This week, it’s unclear whether mort­gage rates will rise or fall.

There are few eco­nomic data points due for release so mort­gage mar­kets are expected to take their cues from Europe where there’s no short­age of story lines.

In Spain, there are protests over new aus­ter­ity mea­sures. In France, a new Pres­i­dent may be elected — one whom opposes aus­ter­ity. In the Nether­lands, a new bud­get passed that includes aus­ter­ity mea­sures, but barely.

Each sto­ry­line gen­er­ates uncer­tainty about the future of Europe and its uni­fied econ­omy. As the uncer­tainty grows, global investors seek safety in the U.S. mrot­gage bond mar­ket, a move that helps mort­gage rate shoppers. When demand for mort­gage bonds is high, mort­gage rates tend to improve.

Also affect­ing mort­gage rates this week will be Friday’s Non-Farm Pay­rolls report.

The econ­omy is expected to have added 165,000 net new jobs in April and the Unem­ploy­ment Rate is believed to have remained unchanged at 8.2%. If there is a devi­a­tion from either of these expec­ta­tions, mort­gage rates will change. If the actual jobs data is stronger than Wall Street expec­ta­tions, mort­gage rates are likely to rise.

If the jobs report is weak, mort­gage rates should fall.

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