From NYT:
"The average interest rate for 30-year fixed-rate mortgages rose to 6.71 percent on Tuesday, from 6.44 percent on Friday, according to HSH Associates, a publisher of consumer rates. The average rate for so-called jumbo loans, which cannot be sold to Fannie Mae and Freddie Mac, was 7.8 percent, the highest since December 2000.
Loan rates are rising because of concern in the financial markets about the future of Fannie Mae and Freddie Mac, which own or guarantee nearly half of the nation’s $12 trillion mortgage market.
. . .
The rise in rates is of greatest concern for homeowners whose mortgages required them to pay only the interest on their loans for the first few years. If such borrowers are unable to refinance into lower-cost loans, many of them will face the prospect of having to pay both interest and principal at higher, adjustable rates.
For borrowers with a $400,000 loan, such a jump could send their monthly payments to $2,338 from $1,417, estimates Louis S. Barnes, a mortgage broker at Boulder West Financial in Boulder, Colo.
. . .
'When we get to rate levels like this, the market just shuts down,' Mr. Barnes said".
9 comments:
So the real question is how high are they going to go?
These are still relatively low rates and will quite likely continue to rise for a while.
Naturally rising rates puts more pressure on the housing market, especially at the jumbo level. If we get an interest rate spike it will put even greater pressure on those areas still in the standoff phase.
I can only see mortgage rates increasing for the foreseeable future. It could also have quite serious effects for current home-owners who will seriously struggle to manage their repayments. Some might consider investing in mortgage bonds which would secure their mortgage in the case that rates get out of control.
5 years to build up
5 years to fall
crash and burn baby
a realiable source said that 30yr fixed are at 7 1/8 today...
buck,
conforming or jumbo?
While this is true for most lenders, not Navy Federal. Check out their rates...
http://www.navyfcu.org/rates/mortgage-frameset.html
6.25% for conforming or jumbo 30-yr fixed.
I have my loan with them - lowest rates around - if you qualify.
Doug, 6.25 is a good rate, but notice (a) you have to pay a 1% loan origination fee (or pay .25% increase in interest rate) and (b) you have to pay .75 points. Putting those together would get you closer to the rates elsewhere. On bankrate.com, last night there are a lot of places offering 0 points, 0 origination fee loans for 6.75% -- still below that 7.125% noted by the reliable source. Of course all this could change very quickly.
Can someone explain to me what the bailout bill will do to the rates? My guess is the rates will drop because the people who buy the debt from banks will feel that the gov will never let them go underwater. Does that seem reasonable?
Also how much does everyone think the rates will go up per year? My guess is no more then 1% per year. In which case it makes plenty of sense to wait as houses are falling between 1-3% per month her in montgomery county (note: I did not say "crash proof*" arlington).
*not really crash proof
"Alex said...
My guess is the rates will drop because the people who buy the debt from banks will feel that the gov will never let them go underwater. Does that seem reasonable?"
Perhaps, but the flip side is with inflation really starting to rise, investors will not buy them without a decent premium over inflation.
At this point, I would say the latter is doing more to drive them up than the former is to drive them down, regardless of the govt backing.
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