This is now the 11th week in a row where 30 mortgage rates have fallen. It also marks the 4th week where mortgage rates have hit new 40 year record lows. In this market the 30 year mortgage product has become by far the most used mortgage product. This is because the other mortgage rates offer rates similar to the 30 year but with shorter time spans making them somewhat pointless.
The 30 year mortgage fell from 5.10 to 5.01. At this point its hard to see the streak of consecutive drops in the 30 year rate continue much longer. It obviously cant drop forever. I have talked to a few mortgage brokers this week that think 5 is about as low as it will go. A few other think it could get down to 4.5 or so. The 15 year rate dropped from 4.83 to 4.62 making it a little more relevant than it was last week.
The 5 year arm fell to 5.49. As long as the 5 year arm is above the 30 year rate it doesnt really matter what the rate does. The one year arm jumped from 4.85 to 4.95. Although its probably been a pointless mortgage product for a few weeks it would be interesting to see if it rises above the 30 year rate as well. But again there is virtually no reason to get an arm for 4.95 when you can get a 30 year note for 5.01.
Also just in case you were wondering the fact that the 5 year arm is higher than the 30 year mortgage is extremely odd. This is the first time this has every happened. Its simply another sign of the strange mortgage environment we are currently in.
Jan 8, 2008
30-yr 5.01 15-yr 4.62 5-yr ARM 5.49 1-yr ARM 4.95
Dec 31, 2008
30-yr 5.10 15-yr 4.83 5-yr ARM 5.57 1-yr ARM 4.85
Dec 24, 2008
30-yr 5.14 15-yr 4.91 5-yr ARM 5.49 1-yr ARM 4.95
Dec 18, 2008
30-yr 5.19 15-yr 4.92 5-yr ARM 5.60 1-yr ARM 4.94
Dec 11, 2008
30-yr 5.47 15-yr 5.20 5-yr ARM 5.82 1-yr ARM 5.09
Beyond mortgage rates its always interesting to look at actual mortgage payments. Using our mortgage calculator we ran the current mortgage rates on a 200k loan. For good measure we also ran the numbers on the rates from a week ago and rates from October 30th (when rates first started to slide).
Jan 8th
30-yr $1074.86
15-yr $1542.28
5-yr ARM $1134.32
1-yr ARM $1067.53
Dec 31th
30-yr $1085.89
15-yr $1563.93
5-yr ARM $1144.37
1-yr ARM $1055.38
Oct 30th
30-yr $1258.87
15-yr $1708.31
5-yr ARM $1245.77
1-yr ARM $1120.56
The mortgage payment for the 30 year loan dropped $11.03, so not really a huge savings. But if we look back to October 30th we see that the payment dropped $184.01 or 14.62%. This is a pretty huge savings. This means that you would be making the same mortgage payments on a 200k house purchased today as you would have on a 170k purchased on October 30th.
So what is my advice? First of all it certainly makes sense to refinance. For instance, (as in the example above), if you purchased a house on October 30th it certainly makes sense to refinance if you can lower you mortgage payment by almost 15 percent.
If you are planning on buying a house I would probably lock in now rather than later. The chances mortgage rates are going to go up is probably greater than the chances they will come down much more. There is the possibility there will be a 4.5% interest rate from the government. One could risk waiting on that. The only problems if ther e is no guarantee that will get passed and even if it does we don't know what restrictions might come with a government loan.
Ki is a realtor in Austin Texas. His website has information on mortgage rates along with a free mortgage calculator.
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