Your Questions About Mortgage Rates Trends

Mary asks…

Interest rates for refis going lower in the next few days?

I’d like to refinance from my current one-year old first mortgage at 7.00. BofA is offering me 5.25 with about 1.24 in points. Looks like the time is right now to do it, but I understand the Feds will most likely drop their interest rates again at some sort of meeting on the 29th and 30th of the month. What sort of bearing will this have on refis? Someone told me that really only has to do with firsts and that refis follow another indicator (maybe the bonds or something, I don’t know). I know very little about this, but it seems to me that waiting until after the 30th would be a good idea. The mortgage person at my bank says it’s just as likely refi rates will start to trend up again as soon as any cuts are anounced. What do you think? I know my banker is there to sell me loans – is she just trying to get me to sign up now, or is today truly a better bet than after the 30th? I’m not very savvy in this – it’s my first home.
I did already do the application, I just asked her to “float it” as she called it and not lock in the rate for a day or two until I understand more about what’s going on. I hate to feel I’m taking advice on something from someone who’s trying to sell it to me, although she was very helpful and I wasn’t feeling pressured.
I love you guys! You’re exactly the answers I wanted. I’m sorry to have misspoken my offered rate – I checked once more and to be specific, it was 5.375% with points of 1.009 which I think is excellent for a 30 year fixed. I emailed her back already and said “go ahead and lock it in” and I’ll call in the morning and make sure she does it. I also spent a lot of time at Bankrate.com learning more about interest rates and trends and it certainly does look like they’ll go back up. I may be a little piggy sometimes – but never a hog! 😉 I wish I could vote for best for all three of you mortgage guys, but I’ve got to go with the hog answer becacuse the thought of getting slaughtered lit a fire under my tushy to study up asap and lock it in. (You other two get good vibrations sent your way, though…!)

admin answers:

The Fed cutting prime rate has NO effect on mortgage rates. It can actually make them go up! Prime rate controls credit cards, car loans, and Home Equity Lines of Credit. If it’s a good loan don’t be greedy. If you try to “play” this market you’ll get burned. The market is too volatile, take advantage of the gift Wall Street is giving you right now.

Pigs get fed, hogs get slaughtered.

Lizzie asks…

UK Mortgage: SVR or Fix ?

Hi People

I know what I’m asking is one of the most gambled financial questions many of us have to make a decision upon and ultimately only I can make the decision as there is no real fast or easy answer, but I am interested in your view and reason behind it. So if you have the time to give me your view it would be greatly received.

I have held a mortgage with the halifax since 2002 and just finished my third mortgage product with them, a fantastic tracker at 0.69% above B.O.E base rate. I have reverted to the Halifax SVR of 3.5%.

My payments have more than doubled, yet are still lower than they were 3 years ago when I was on a fixed product of 4.89%. I just don’t know which way to go now, my choices are-

1) 2 Year Tracker +2.69% (so 3.19% at current rate)
2) 2 Year Fixed at 3.89% £999 start up fee
3) 3 Year Fixed at 4.79 no fee
4) 5 Year fixed at 5.89% no fee

or-

5) Stay on the SVR 3.49%

As much as the SVR seems appealing now, is that a short term gain given the economic climate? There seems to be much speculation as to what will happen with the Bank of England base rate. I am no economist but the way I see it is, yes they may have to rise the base rate 1/2 a point, then perhaps two more half points to end up at 2% in the next two years. But they must do so with caution as no one seems to be buying much at present and if they increase too much then we’ll have a static housing market.
This is an educated presumption as I am currently trying to sell another property in Nottingham for 90k, with not as much as a sniff of interest. The 4 bedroom, Victorian house is very pleasant and priced fairly, the problem is no first time buyers seem to be able to afford the deposit and no investors want it either. Would interest rates rise firther stagnate the market?

Having done some calculations, the tracker offered for 2 years would allow the rates to jump up by a point and remain cheaper, but if they move up further then the 3 year fixed appears the best option.

I have not thought or looked at predicting the economy in 3 years time, this is beyond my knowledge or ability to site trends. so I hand the question over to you…………

admin answers:

You have mentioned the mortgage fee in your list, but are you taking other fees into account. You will probably have to pay legal fees and a valuation fee, which may come to £500 or more. So you have to take this into account when considering the “savings”.

Mortgage rates are based on the rates banks can get when borrowing from each other. These are based on the Bank of England (BOE) rate, but will vary depending on the length of time you are borrowing for. This is because the rate reflects what the lender thinks BOE rates will do over that time period. So the mortgage rate you are offered is basically the inter-bank rate for that period, plus a profit margin. This margin depends mainly on how risky you are – the higher the risk the higher the margin. Your tracker rate gives a guide as the the kind of margin you are being offered – eg 2.69% above the baseline. I think this is about as low as it gets at the moment.

My understanding (from news reports etc) is that banks have set their 3 and 5 year inter- rates based on an assumption that BOE rates are going to rise by 2 or 3% in the next couple of years. If this understanding is correct then fixed mortgage rates should not go up (straight away) if BOE rates start to rise, because they have already factored this in. But if it turns out BOE rates stay lower for longer the banks might actually drop their fixed rates in the coming months. Either way, you are better off staying on your SVR and jumping on to the fixed rate only when BOE rates start to rise, or when fixed rates drop a bit.

Historically a banks SVR was their worst rate. But they got so much bad publicity a few years ago, that the SVR is currently not that bad compared to their other rates. I suspect that as the economy recovers the SVR will start to look bad as offers and competition comes back into the market. But for the time being the SVR is often just as good as the other rates you can get, and has the advantage that you don’t need to remortgage and pay all the associated costs to get it.

In general you don’t necessarily save much, if anything, by jumping from one fixed rate deal to another. The banks want to make their money, so the average rate over the 25 years of your mortgage, is likely to be similar to the rate you would have got by staying on an SVR or a lifetime tracker. If you take into account the fees for continuously re-mortgaging you might end up paying more for regularly switching. The only benefit of fixed rates is that you know what you will be paying for the next 3 or 5 years, which some people prefer to the volatility of payments that could change each month.

If you have the guts to stick it out for a bit you might find that long term trackers start to look like the best bet. I doubt you’ll ever get as good a deal as you could have got before the credit crunch (I’m on a lifetime tracker 0.44% above base rate), but I’d like to think you’ll get something better than 2.69% above BOE base rate.

Mark asks…

Why have sales of new homes in U.S. fallen to record lows, at same time Canadian home sales at record highs?

Here’s the U.S. data: http://www.bloomberg.com/apps/news?pid=20601068&sid=aToSv9PXNo3g#
headline: ” Sales of New U.S. Homes Dropped to Lowest on Record (Update3) ”

Here’s the Canadian data: http://www.theglobeandmail.com/report-on-business/canadians-fret-over-mortgagerates-prices/article1510682/

headline: “On Tuesday, Bank of Nova Scotia forecast in its real estate trends report that home sales are expected to rise 10 per cent to 510,000 this year, while average prices are expected to jump 8 per cent to a record $345,000. ”

What the heck gives?
Why is our real estate market booming ! , no, its SHOOTING TO THE MOON ! , but at the same time the U.S. housing market seems really dead ??? Why the huge difference ??

Is there something about Canadians that make us smarter, perhaps better than the Americans ?

admin answers:

Yes, at a time when Americans were buying houses “with no money down” and getting into risky mortgages, Canada continued to require a 20% down payment. This meant that people buying houses could actually AFFORD the houses they bought, so you didn’t have the overpricing and subsequent crash we did. Dr. Deth: I defy you to find a $20,000 house in decent condition in any major city in the US–i.e., a house that a normal person would want.

Good going, Canada! Can I come live there?

Actually, one of your assets is that you have a small enough population that your govt can still get things done. We’ve had gridlock in govt for 20 yrs+, so even though there are problems everyone knows need fixing, we can’t agree on what needs to be done. I thought long ago that the US should split into 4 countries so we could get moving again.

James asks…

How is Florida real estate getting better?

Florida is one of the states most affected by the mortgage crisis. The most accessible loans available in this market are FHA loans. After qualifying for an FHA loan I initially thought the difficult part of being a first time home buyer was behind me. However, it would seem that the journey has just begun.

Most communities do not meet the requirements for FHA approval. The most common reason is the high foreclosure rate. The community of interest must also be current on HOA fees, there must be a certain percentage of home owners to investors and other such conditions must be met for an FHA approval. With all these regulations and restrictions associated with an FHA loan it is not difficult to imagine that even this type of loan may become obsolete. The dilemma now is not whether you will exceed your budget but whether the available homes within your budget will qualify for the loan type.

With all fairness I am obligated to mention that conventional loans or cash sales do contribute to recent sales. The requirements for a conventional loan in Florida are not realistic. Where some borrowers may be able to contribute 10% down payment the newly required 25% down payment to say the least is a stretch on nearly anyone’s budget not to mention the budget of a typical first time home buyer.

Investor are buying at extremely low prices with cash and conventional loans. FHA loans cannot compete with these investors due to all of the restrictions and rules that they must adhere to. The increasing of number purchases by investors in a neighborhood/community further limits opportunities available to FHA first time home buyers. As a result investors and not “home owners” are benefiting from the low market rates.

I have concluded from my observations that the so called homes sales increase doesn’t fully disclose the underlying problem. The true rate of available homes and foreclosures properties are not represented in the market. Banks are slowly trickling inventory into the market while the excess or “ghost inventory” remains hidden in their vaults in an effort to manipulate market values.

I have also noticed another disturbing trend. Yes, single family homes, townhouses and condos are at an all time low. However, where FHA approval is not available home prices are much lower than market values. One would initially think this is in their best interest but these homes are primarily only available to investors due to requirements and restrictions placed on FHA loans. Where homes are FHA approved this results in homes being listed and maintaining the inflated prices. The limited homes available especially ones built in 2005 and 2006 are in high demand. As a result a new type of bidding war is ensues. Potential home owners of low to moderate income cannot compete with investors of whom recent sales can be attribute to.

I expect home prices will continue to fall. Do you predict a change in the way the real estate market and lenders addresses these new issues and it’s direct connection to lower home prices? Do you think the government will relax some of the FHA regulation to combat these issues? (which in itself has pros and cons associated with the outcome for home buyers). Finally do your foresee a new program/stimulus that will assist first time home buyers in the near future once this $8,000 tax credit expires?
I live in Pompano beach area. I thinking of buying in palm beach county. That market is over saturated with town homes and condos…. Over saturation can be a good or bad thing.

admin answers:

Wow, you should be a writer!! Lol The way you typed this; your wording, ect is great!

Yes I do agree that here in FL it is very hard to obtain a loan & have all other requirements met as well. But the truth is…if you search hard enough & have a great real estate agent you will be able to find a good home that will except FHA loan & meet all the requirements. (I am going through the same thing right now in FL as well.) What part of FL do you live in?

Daniel asks…

What do you think If 1 in 10 U.S. households at risk of losing their homes should we abolish the Dream Act?

Our own people are suffering and Obama save the homes programs failed. What should come first illegals getting free college educations or helping out fellow Americans ?WASHINGTON — One in 10 American households with a mortgage is at risk of losing its home, and the foreclosure crisis could worsen if jobs remain scarce.

About 9.9 percent of homeowners had missed at least one mortgage payment as of June 30, the Mortgage Bankers Association said on Thursday. That number, adjusted for seasonal factors, was barely down from a record-high of more than 10 percent as of April 30.

The Labor Department said requests for unemployment benefits fell sharply last week. The drop in first-time claims to a seasonally adjusted 473,000 was the first decline in a month and a hopeful sign after a raft of dismal economic reports.

Still, unemployment claims remain much higher than they would be in a healthy economy. Employers are reluctant to hire as economic growth appears to be slowing.

The number of Americans who are missing payments and falling into foreclosure has followed the upward trend in unemployment. The jobless rate has remained near double digits all year.

“Ultimately, the housing story, whether it is delinquencies, homes sales or housing starts, is an employment story,” Jay Brinkmann, the Mortgage Bankers Association’s top economist, said in a statement. “Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers.”

More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. Economists expect the number of foreclosures to grow well into next year.

Besides forcing people from their homes, foreclosures and distressed home sales have pressured home values and crippled the broader housing industry. They have made it difficult for homebuilders to compete with the depressed prices and discouraged potential sellers from putting homes on the market.

The housing market is struggling even as mortgage rates fell to the lowest level in decades for the ninth time in 10 weeks. Mortgage buyer Freddie Mac said the average rate for a 30-year fixed loan fell to 4.36 percent this week.

Rates have fallen since the spring as investors, spooked by a slowing economy, shifted money into the safety of Treasury bonds. That has lowered the yields on long-term Treasurys. Mortgage rates tend to track those yields.

The economy has grown for four straight quarters. But the pace has slowed from a 5 percent annual rate in last year’s fourth quarter to 3.7 percent in the January-to-March period. It has weakened even further in the past several months.

Many economists expect the government Friday to revise lower its growth estimate for the April-to-June quarter to below 2 percent. That’s weak in normal times and even more worrisome after a steep recession.
http://www.chron.com/disp/story.mpl/business/7172778.html

admin answers:

Its time our country start to take care of our own people.

The only reason unemployment rates are showing at a lower percentage is because many of the unemployed are not longer qualified to receive unemployment and some of the unemployed have taken part time jobs which is all they can get.

What is stated above is correct, the job market needs to improve before housing becomes stabilized.

My son lost his job over 2 years ago, after awhile of looking for jobs and becoming tired of staying at home, he entered a new field, home health care, but that is only a part time position. However, because he had this part time job that paid him almost as much as his unemployment did, the was no longer qualified to receive any unemployment. Therefore, he is now 9 months behind on his mortgage and has made a deal with the bank to have the house listed to sell so that the mortgage can be paid off, and the realtor will get paid, IF the house ever sells, my son has lived in this house since 1991 and now will lose the house and walk away with no money.

I say a big ThankYou to our deal old Uncle Sam who has seen fit to screw as many Americans as they can.

TO our Government…START HELPING THE AMERICAN PEOPLE! We are losing every thing this country was based on.

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