Another dose from Sacramento Real Estate Gal's mortgage expert Huck Ferrill:
One would think from the news, that mortgage rates are falling like crazy. Not true!
While the Fed Funds rate has dropped rather precipitously, my clients have been surprised to hear that some mortgage rates have actually risen. For example, the range for a 30 year fixed rate loan is actually about 50 basis points higher now, than two weeks ago, ranging from about 6-6.25% depending on whether one pays points or not. The reason is mortgages are longer term instruments whose rates move roughly with US Treasury notes and bonds, as opposed to a short term rate like Fed Funds. A ten year Treasury is currently yielding about 3.8% currently, up from a recent low of 3.4% in late January.
These are still good rates, however.
My point is that it's a bad policy to delay purchasing or refinancing in hopes rates will drop. One might wait a long time. So essentially, if rates and the resulting payment look good now, go for it. Don't be greedy.
So far, only 15, 20,and 30 year fixed rates have gone up. Happily, hybrids that are fixed 3, 5, 7 and 10 years have held pretty steady. I just checked one of our investors to find they are buying 5 year fixed product at under 5% for one point. Similar 7 year product ihttp://www.blogger.com/img/gl.link.gifs out there at about 5.5. These hybrid products can be really attractive when the yield curve is steeping, as it is now.
Also read: My personal mortgage train miss; February Mortgage Update; market predictions for 2008.
2 comments:
Looks like Wells Fargo is requiring 15% down for conforming loans and 25% loans for non-conforming loans. They will probably weather this storm better than most other banks. I wonder what this will do to home prices. Your thoughts???
We do quite a bit of business with Wells Fargo, and have for a long time. You're right as to their staying power. They will be just fine, as will almost all the familiar bank names. The reason is that they're all required by regulation to maintain very high capital ratios.
As for required downpayments, all conventional lenders have adopted a policy of requiring 5% more down than they ordinarily would for the same program, due to current market conditions. It's a precautionary policy and we've seen it before.
Wells Fargo for example, offers a program called "Home Possible," that ordinarily requires zero down payment. However at current policy, the minimum down payment is 5%, an investor purchase requires 15% down instead 10%, and so on. 20% down for jumbo loans is still available at other banks. Also, it's still quite possible to finance ALL of the purchase price and closing costs if one uses FHA financing (even at Wells Fargo).
Overall, these policy changes have had very little effect on home prices, which seem to have bottomed out anyway. In fact, we're seeing multiple offers rather routinely now, on well priced bank repos.
Last comment is an amendment to my first post-we had a good little rally at the end of this week, and 30 year fixed rates improved to a range of 5.75-6%. In comparison the hybrids still offer a bargain though.
Good question! Thanks for asking.
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