Mortgage Interest Rates Move Down
Posted by Kigray in MortgageMortgage interest rates moved down this week. 30 Year rates feel back below 6 dropping from 6.10 last week to 5.94. 15 Year rates all fell quite a bit going from 5.78 last week to 5.63 this week. Below are rates for the major mortgage products for the last few weeks.
October 9, 2008
30-yr 5.94 15-yr 5.63 5-yr ARM 5.90 1-yr ARM 5.15
October 2, 2008
30-yr 6.10 15-yr 5.78 5-yr ARM 6.00 1-yr ARM 5.12
September 25, 2008
30-yr 6.09 15-yr 5.77 5-yr ARM 6.02 1-yr ARM 5.16
September 18, 2008
30-yr 5.78 15-yr 5.35 5-yr ARM 5.67 1-yr ARM 5.03
One thing that stands out is Arms are looking less and less attractive. Arms are loans that start adjusting after a certain number of years. When Arms adjust upward and homeowners cannot make the new higher payments they frequently lead to foreclosure. It seems that banks are finally looking to make Arms less attractive. I have wondered why they didn’t do this in the past. Looking at today’s rates there is almost no reason to get a 5 year Arm over a 30 year fixed rate mortgage. Currently a 30 Year fixed rate mortgage is 5.94 and a 5 Year arm is 5.90. Considering the added stability of the 30 Year fixed rate mortgage the small difference in the interest rate hardly seems worth it. Let’s look at what a mortgage would be using our free mortgage calculator for a 200k loan. We also ran the numbers for mortgage interest rates from last week and in the middle of the summer.
October 9th
30-yr $1191.39
15-yr $1186.27
5-yr ARM $1647.99
1-yr ARM $1092.05
October 2nd
30-yr $1211.98
15-yr $1664.03
5-yr ARM $1199.10
1-yr ARM $1088.35
July 24th
30-yr $1281.28
15-yr $1707.22
5-yr ARM $1219.75
1-yr ARM $1134.32
So again looking at the rates it’s pretty obvious the 5 year loan does not provide much of a benefit compared to a 5 year loan. If we look back to July 24th we can see that in general the difference between the 30 year fixed mortgage product and a 5 year arm is greater.
The other trend we have been seeing is the growing gap between owner occupy and investment loans. Since lenders are seeing more foreclosures with investment loans they have been charging a higher interest rate for investment loans. So while mortgage interest rates for owner occupy loans have fallen over the last month mortgage rates for investment loans have held steady. That said I think investment properties are pretty attractive right now in spite of higher interest rates. This is basically because we have seen prices falling more for investment properties and therefore making them a better bargain. The last question is what is going to happen with rates moving forward. I can’t really say if they will go up or down but I expect rates to remain volatile as long as the rest of the financial markets remain volatile. Therefore, if you are looking at buying a property I would lock an interest rate early and monitor the rate afterward in case it drops and you can relock the interest rate.
Resources: Ki writes regularly about mortgage interest rates. His site has a tool that graphs mortgage interest rates. He also provides a free mortgage calculator and graphs of mortgage rate trends.
