mortgage rates « Home Loan Information

27May/100

Low rates, excess inventory, great time to buy?

: Image via Wikipedia

Blog posts are generally best when timeless but this one should serve as a reminder to those who waited … and waited too long. For several months it has been told, reported and spread that interest rates would approach or hit another all time low while housing prices continued to be low and inventory continued to be high.

That time is now.

The truth is it is always a “good time to buy” especially when you are moving to a new city, upsizing, downsizing, or simply upgrading. The deeper truth is some times are better times to buy than others. Take the strawberry for example.

A few days ago I stopped in the local market to pick up some bread and meat and in the entrance there was a large display of bright red strawberries. It looked to be quite literally millions of them. They were loose and prepackaged in containers of various sizes all the way up to a “banana box” carton. This is the first time I have ever seen that many strawberries in that particular market.

Not only were there so many strawberries but the people were all over them. It was like a fire sale at the dollar store with bags and buggies and moms, dads and others looking over the display and taking them away swiftly. In fact there was a stock cart also filled with them sitting just a few feet away presumably to restock as needed. It looked as if it would be needed soon!

Most interesting was the price – 3 pints for $4. Now I’m not sure if that is a good price in your area but in our area it’s normally $5 for 1 pint. Obviously, even if you are really bad with the math, this is a tremendous bargain. In fact so tremendous one would imagine a lot of those packages going home will not be consumed in time and some will even go to waste.

The housing market right now is like those strawberries.

There is a huge amount of inventory and many professionals speak regularly of “shadow inventory”. It is said there are as many as a million or more homes which are simply not on the market right now because it may be more profitable to wait until the market recovers to list and sell. Maybe so. If that is accurate it only means the inventory levels will be high a little longer.

Top the overstock inventory with the very real fact that interest rates are the lowest they have been and you have a win win situation for any buyer.

I can say this about every commodity: the best time to buy is when others are having a difficult time selling. Overstocks (harvest time) and cheap money could absolutely make this the best time to buy in our lifetimes.

28May/090

What is a Par Rate in Mortgages?

If you know golf, you know par. From the dictionary at AudioEnglish.net par is “a state of being essentially equal or equivalent; equally balanced”. In golf it’s essentially zero (no more, no less). In mortgages it is applied to mortgage brokers who have access to “wholesale rates” who pass along those wholesale rates at no yield (no profit) in order to beat the bank in interest rate.

The “par rate” is generally about .25 to .5 percent lower than the average rate you can get at your local bank or big national lender.

Lenders don’t actually have a “par rate” because they are not required to disclose their profit like brokers are. Brokers are required to disclose the amount of “Yield Spread” they earn which is the profit between the par rate and the rate they are charging the borrower. Banks and lenders receive much higher profits often called Service Release Premium but they are not required to disclose even though they are making as much as several thousand more dollars in immediate profits.

Tagged as: interest rates, mortgage rates, par No Comments

7Jan/090

Mortgage rates headed to double digits

Ken Cook

When you have spent enough time in your own industry you learn to read or sense change by subtle changes and scuttle from insiders. If you are a musician, for example, you know of a subtle change in beat patterns or melodic phrasing long before the general populace. Likewise if you are in the medical profession you will hear something at a seminar or read it in a published research paper long before the rest of the world knows about it. If you expect anything different from the finance and mortgage industry you are stopping short.

Long before, literally years before in some cases, the remainder of the open world knew there was trouble on the horizon for the real estate and finance industry there was scuttle in the mortgage industry. Then months before it started the scuttle got louder. Finally just weeks before the fallout started happening it was being shouted in the industry and starting to leak to the remainder of the world.

Today there is scuttle and it is not quiet scuttle. It is also backed by sound research and trend patterns that indicate we are headed for another impacting change in the real estate finance industry. Lately, as you may already know, the federal government of the United States has started purchasing Mortgage Backed Securities. Their purpose behind this is to instill confidence in other investors that it is “okay to get back into the pool”. Since this was supposedly the main focus of the initial bail-out plan the activity should not come as a surprise. Unfortunately, and already predicted by some seasoned economists, the impact on the market is more like dropping a pebble in the ocean. The result could be further recession strengthened by inflation.

In the end, according to many insiders, the result will be higher rates -even into the double digits- by the end of 2009 if not sooner. If I were in need of purchasing or refinancing I would not wait. Some insiders believe mortgage interest rates could go as high as double digits and sooner than we all may think.

At the time of publishing this article there are interest rates on 15 year mortgages as low as 4.625% at 4.737APR and 30 year mortgages just .25% higher. People, it just doesn’t get any better than this. Mortgage rates, without government subsidies to the banks, will never get much lower. In fact, it is impossible. As long as investors and depositors want a return there must be profit. So until you, Mr. and Mrs. General Q. Public, will in invest in lenders for zero return the interest rates cannot go below 4.5%.

Tagged as: 15 year, 30 year, fixed rates, interest rates, mortgage rates, purchase, refinance No Comments

2Jan/090

Will interest rates go lower?

As buyers and lenders we have become somewhat spoiled. During the last few years we were spoiled to have sustained low interest rates in the mid 5s which was historically low. Of course the uneducated media got a line on that and began suggesting rates could go lower. Well, could interest rates go lower? How low can interest rates go?

First let us understand how interest rates are the source of most of the profit for lenders. Origination fees, contrary to popular belief, rarely generate any profit at all. In fact it usually costs more to originate a loan than the origination fees. Therefore the lender depends on the interest to earn a profit.

Lending money also has a cost. Money which is “on loan” carries a cost every month it is loaned and also prevents the lender from investing in other, more profitable, investments. How much it costs every month for money to be on loan varies from lender to lender and loan to loan but those costs include: office space, technology costs, payrolls, employee benefits plans, legal fees, fraud detection and ongoing monitoring, servicing fees, collection costs, and more.

Furthermore there is the cost of paying dividends to investors. Now every one of you can understand this: as an investor you must make a return on your dollars invested or you are not going to invest. So let’s say you have an IRA with $100,000 in it. You can either lend it directly through a company like Novation or you can buy a single note or you can invest into a real estate investment trust.

Investing directly into a loan through a company like Novation may earn you 10% or more annual return because you alone are taking the risk. Investing into mortgage notes you may be sharing the risk with other investors. Investing in an REIT you do not actually have ownership in any one single note and therefore most likely receive the lowest return on your investment. What is the minimum return on your investment you would like to have? Would you go as low as 2%? Probably not. 3%? Not likely. chances are to even tick your interest you are looking for a minimum of 4% APY.

Now let’s look at that question again. Will interest rates go lower and how much lower will interest rates go? Mortgages are not funded by lenders they are funded by investors. Now that you know who funds mortgages (and not it is NOT the Federal government and that’s a very long story but FNMA and FHLMC depend on investors) and you know they are people just like you do you really see them going lower than 4.5%?

Chances are rates will hover around 5% for some time with small, quick dips, into the 4% range.

Tagged as: interest rates, lower rates, mortgage rates No Comments

Live Desk

Daily Rates for Qualified Buyers

	Today	Last Week
30 Year Fixed	3.50%	3.61%
15 Year Fixed	2.88%	2.92%
5/1 ARM	2.31%	2.51%
See more mortgage rates at Zillow.com

(Note: These are the lowest rates possible offered through advertisers and lead buyers at the company providing the data. They may require discount points.)