Mortgage Rates Defy Expectations

The 30 year rate fell from 5.07 to 5.06 this week. This is the 3rd week in a row where interest rates have either fallen or stayed flat. The 15 year rate stayed flat at 4.39. The 5 and 1 year arms were mixed with the 5 year arm falling slightly from 4.03 to 4.00 and the 1 year arm rose from 4.22 to 4.25. Below are rates from the weeks from Apr 01, 2010 to Apr 29, 2010 and rates from October 15th (6 months ago). Apr 29, 2010 30-fixed 5.06 15-fixed 4.39 5 ARM 4.00 1 ARM 4.25 Apr 22, 2010 30-fixed 5.07 15-fixed 4.39 5 ARM 4.03 1 ARM 4.22 Apr 15, 2010 30-fixed 5.07 15-fixed 4.40 5 ARM 4.08 1 ARM 4.13 Apr 08, 2010 30-fixed 5.21 15-fixed 4.52 5 ARM 4.25 1 ARM 4.14 Apr 01, 2010 30-fixed 5.08 15-fixed 4.39 5 ARM 4.10 1 ARM 4.05 Oct 15, 2009 30-fixed 4.92 15-fixed 4.37 5 ARM 4.38 1 ARM 4.60 So the market has made me a liar. I thought we were going to see some volatility in interest rates over the month of April. Instead rates have stayed remarkably flat. Besides the week of April 8th mortgage rates stayed between 5.06 and 5.08. At 5.06 we are also near 4.93 which is the lowest mortgage rate seen thus far in 2010. This is kind of surprising since we have been expecting to see rates increase over the last month. So rates are one thing but it's also informative to see actual mortgage payments. We took today's rates and using our mortgage calculator we determined the rate for a 200k mortgage. We also did the same thing with rates from April, 15 2010 and rates from October, 15 2009. Apr 29 30-year $1080.98 15-year $1518.76 5-year ARM $954.83 1-year ARM $983.87 Apr 15 30-year $1082.21 15-year $1519.78 5-year ARM $964.07 1-year ARM $969.88 Oct 15 30-year $1063.88 15-year $1516.73 5-year ARM $999.16 1-year ARM $1025.28 So as we can a mortgage payment today is pretty similar to what we saw 2 weeks ago. In fact mortgage payments only decreased by 11/100 of one percent. So what is going to happen moving forward? It's hard to tell. The predications that the government not putting resources into buying mortgage backed securities could steal lead to more up and down fluctuations in mortgage rates but we have certainly not seen that this month. Overall I think that rates are either going to stay roughly flat or rise drastically. There is simply not that much room for them to fall. Rates are currently 5.06. The lowest they have even been is 4.71 (which we saw in 2009) and the highest was above 15 percent. So what is our advice? Basically if you are planning on getting a loan I would do it sooner rather than later. Also I would lean for a 30 year rate instead of an arm because we expect rates to be higher in 1 to 5 years than they are today.

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