Mortgage Rates Still at 2004 Lows, But So are Home Prices

The great news is that mortgage refinance rates are still hovering at record low levels! Not so good news is that home prices continue to plummet.

House prices plunged again in October, with the rate of year-over-year decline accelerating to a new record high of 19%. The peak-to-trough decline in the Case Shiller 10-city index is now 25%; the 20-city index is down 23%. Although, many can stand to reap significant benefit by refinancing into current low fixed rates, they may not have adequate equity in their home to take advantage.

It was a common scenario in this decade’s real estate boom for home buyers to finance their house with as little as a 0% to 10% down payment. So, a home purchased for $200,000 in 2005 may only appraise at $160,000 to $180,000 today and spoil any hopes for one to refinance into today’s low mortgage rates as there is either no equity available or even a negative equity scenario, once closing and settlement costs are rolled back into the potential new home loan.

Now, before you freak out and think your home’s value is sinking, consider that the above statistics are only averages. In fact, there are many regions in the country that have experienced little to no depreciation in home value for 2008. Home sales in your specific region, or even neighborhood, is what really matters when it comes to housing values. A home situated in a high cost city in the state of California may have lost 35% of value in 2008, where a home in an average sized community in North Carolina may have held a stable value during the same period.

It is more important than ever to get an idea of the current market value of your home when shopping for a refinance home loan. There are a number of online websites that will give a free estimate of your home’s worth without requiring you to give personal contact information. Just keep in mind that these sites can be off the mark, but will give a homeowner a general idea of their home’s value. The final judge of home value will be determined after a home appraisal is completed.

So how do I take advantage of the current low mortgage refinance rates if I don’t have a lot of equity remaining in my home? Consider checking into an FHA refinance home loan. Qualified FHA refinance rates are currently low also, almost at prime conventional rates, even with high loan-to-value loan scenarios. Most FHA lenders will allow up to a 97% loan-to-value ratio for a straight refinance, and up to a 95% loan-to-value ratio for a cash out refinance. Yes, mortgage insurance will apply, but you may be surprised at the overall savings when refinancing into the current offered FHA mortgage rates.

Well, to say that the year in mortgages has been a crazy ride would be an understatement. Par rates for 30 year fixed mortgages have taken a roller coaster ride between 5% and 6.5%. Home prices have been erratic and lender-underwriting guidelines have changed by the week. Foreclosures and late mortgage payments have hit all-time highs, with little real relief for those affected. We have experienced the fear of a total collapse of our lender and banking system, and witnessed unprecedented government actions to curtail financial doom, while stimulating home purchases and refinances. Many lenders closed up shop while others downsized, just in time for a year-end blessing of super low mortgage rates.

Yes, it has been an adventurous year, not only for mortgages, but the economy as a whole. Many have lost homes, jobs, and savings, but all is not lost. As we all know, what goes up must come down, but remember the opposite is also true. Thank goodness for 2009, and may you have a Great New Year!

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Mortgage Rates Remain Solid Into Holiday Season

If you have been waiting for rates to drop in order to refinance your home loan, consider current refinance rates as your early Christmas present. Par 30 year fixed rates are still hovering in the 5 percent range, which can provide huge benefits to those currently at 6 percent or higher, and looking to either reduce payments or shorten the term of their mortgage.

Just remember that the primo rates are being offered to those refinancing with a loan-to-value of 80% or lower and excellent credit scores. Although mortgage programs across the board have dropped, the previous scenario mentioned is where you can really rake in a nice drop in rate.

For those that have a high loan-to-value ratio and/or poor credit scores, FHA refinance programs are not far behind conventional pricing and still offering great rates.

If you are still on the fence waiting to unwrap that mortgage present this holiday season, consider the following. Bottom line, how much will I lose if I do not lock a rate now? Secondly, and very important… How long do I plan to stay in a new mortgage if I lock a low rate? For instance, if you can save $200 per month by locking now and it costs $4,000 in closing costs, you will break even in 20 months. Now, after 20 months, you will make out with a free and clear $200 per month savings and net a total interest savings of $68,000 over the term of a 30 year mortgage. Now that’s some Christmas cheer!

Home values continue to plague many looking to refinance as home prices continue to fall. The National Association of Realtors said today that existing home sales fell 8.6 percent to an annual rate of 4.49 million in November, from a downwardly revised pace of 4.91 million in October. Just as important is the fact that sales of distressed properties made up 45 percent of all property sales in November. That is a bad sign in the short term, but may prove to at least stabilize home prices going into the new year.
The Treasury yields are still ultra low, while the mortgage spread remains at very high levels. Expect mortgage rates to hover in the current range for a while, unless the yields have a strong bounce, in which case rates will rise close to the increase in the 10-year Treasury yield. If you are undecided about locking a rate now, consider that we are still near historic lows and you could stand to make a nice long-term benefit for rate-term refinances and a significant monthly savings on a debt consolidation loan.
Merry Christmas!

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Mortgage Rates Blasting Lower with Fed Cuts to Boot!

The way mortgage rates have dropped recently is really quite remarkable. We are witnessing par interest rates in un-chartered territory thanks to recent government moves and the action in the Treasury markets. I never thought we would see it, but the 10-year Treasury yield is nearing 2% as we speak! This is great news for those in position to refinance, as rates are as low as they have ever been. The mortgage spread premium is still quite high, but the mortgage-backed securities after market suggests that we may at least experience continued lender activity in the market.

Yesterday, the Fed announced another sharp rate cut. The Federal Reserve cut its federal funds rate target to a range of zero to 0.25 percent. This unprecedented move is aimed at boosting borrowing and lending amidst our current poor economic conditions.

Inflation numbers were released, and we are looking great in that area. Prices dropped by 1.9 percent, most likely due to the drop in oil prices.

Also, yesterday, the housing starts report was released and the numbers were dismal. New home starts fell to a seasonally adjusted annual rate of 625,000 from a downwardly revised level of 771,000 in October. That is a drop of 18.9 percent, the steepest since March 1984. The total is far below the 740,000 pace that Wall Street economists expected. Now, this may appear to be horrible news for the housing markets, but let’s take a positive spin. The report is indicating that the supply of new homes is decreasing, which can be great news for those selling homes and those that are refinancing. Couple a drastic cut in mortgage rates with a declining home supply and we could set up for positive days ahead on the home valuation front.

One of the biggest details blocking potentially positive refinance scenarios has been the value of homes. They are either knocking those refinancing out of the game or bringing loan-to-values too high to make a significant financial benefit for some.

All in all, I’d say the refinancing and mortgage markets are setting up for better days now and ahead. The bottom line is that refinancing home loan consumers stand to benefit in a big way with the current low rates, as long as they have decent credit and adequate equity in their homes.


May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Treasury Yields and Mortgage Rates Still Clinging to Historic Low Levels

Late last week, the yield on the 10-year Treasury bond briefly touched on the 2.5% level, an area not witnessed since 1954. Also, the 30-year Treasury yield dropped to near 3.0%, which is the lowest level since the government began issuing the paper. All of this is of course good news for mortgage rate shoppers as rates are still holding near historic lows. Yes, the mortgage spread premium has also decreased, but is still way above historic norms. In fact, if the spread was behaving in an historical stance, we would be experiencing 5.0% par rates! Still, the current 5.5% mortgage rates are nothing to sneeze at.

Also, late last week, a news story broke that the Treasury might take 30-year fixed rates down to 4.5%. We’ll have to wait on that one though, as much wrangling still needs to be done. Supposedly, the 4.5% rates would only be offered to home buyers in an effort to stimulate purchases and a recovery in the housing markets. There was much opposition to this notion as being discriminatory toward those refinancing, so there will most likely be a political fight on this measure. It may never hit the ground, but at least the government is looking at continued bold movements to help our ailing economy and housing markets.

Actually, right now would be a good time to lock in rates if you are looking to refinance or purchase a home. It is unlikely that the Treasury yields will get much lower, and the possibility of the mortgage spread increasing is a distinct probability. The recent big drops in mortgage rates have caused a stampede in mortgage applications. So much in fact that the ramped-down mortgage industry is having trouble keeping up with the demand. Many feel that spreads may increase to increase their profit spread while slowing applications to a level that can be handled.

On the home front, October’s pending home sales were released and they only dropped by .10 percent, much better than analysts were anticipating. We can’t be too quick to jump the gun and announce that we have reached a bottom in the housing market, but any positive sales numbers are a welcome sight. Possibly, a combination of current low mortgage rates and lower priced homes will help to stabilize housing sooner than anticipated, but only the future will tell.

The overall economy is still a huge mess. Numbers on just about every front are indicating further pain, and corporate sales forecasts into 2009 are not pretty. About the only good news lately has been lowered mortgage rates and a continued decline in oil prices.

Bottom line, if you are looking to refinance, current conditions are optimal as long as you have adequate home equity and a stable income to meet the debt ratio requirements. Most that are refinancing now are realizing several hundred dollars per month savings, which couldn’t come at a better time.


May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Mortgage Rates Continue to Tumble

Well, there’s now good news on the mortgage rates front for a second week in a row … Hooray! After a year of roller coaster rides on the rate front, it’s a welcome change. In fact, mortgage applications surged by the largest amount on record last week as the new Federal Reserve program pushed interest rates down to their lowest level in more than 3 years. It appears that lenders are digging the government’s mortgage security purchase program and guarantees on Fannie and Freddie issued bonds.

The mortgage risk-spread premium has finally abated and lenders are beginning to dip their toes into the mortgage market again. The 10-year Treasury yield has dropped below 3 percent and contributed to the second week of mortgage rate declines.

What is really important here is whether the renewed surge in home purchase applications will result in a coming stabilization for home prices, or whether offers will continue along the bargain basement path. Home values are still key for those refinancing. It doesn’t matter if mortgage rates go down to zero if a homeowner doesn’t have enough equity to qualify for a new home loan.

For those in position to purchase of refinance a home, it would be a good time to take this early Christmas present from the federal government and start locking rates.

Many feel that current low mortgage rates are here to stay for a while, but we all know that that may be wishful thinking. Until housing prices stabilize, any knee-jerk bump ups in the Treasury yield will cause rates to rise again. Much of the risk equation was settled with the government announcements last week, but home prices continue to be the unknown variable that will keep the risk premium up.

But, hey, lets celebrate for the time being as 30 Year Fixed Rate mortgages can be currently had in the sub 5.5% par rate range. Now that’s something to sing about!


May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Mortgage Rates Tumble on Government Mortgage Backing Announcement

Yesterday was a good day for the home mortgage market. Rates tumbled by one-half percent for a couple of very good reasons. First, the government announced that it will now guarantee Fannie and Freddie debt, which are the bonds that they offer to finance the mortgages they purchase. Secondly, the government also announced that it would purchase up to $500 billion of Fannie, Freddie, and Ginnie securities. These announcements, in conjunction with a 10-year Treasury yield drop of almost one-quarter percent caused the perfect storm for a nice drop in mortgage rates.

With these broad government moves, the mortgage industry has become much more stable overnight. Expect the mortgage spread premium to finally decline from its high crazy level of 3.15%. This may be the big stimulus we were hoping for to entice home buyers off the fence and allow homeowners to refinance into significant benefits.

30 year fixed rates are now being offered at under 6 percent for a par rate, a huge move to the downside in a short period of time. We have even seen flashes of 5.5 percent rates for conforming loans at 80 LTV and great credit.

While rates are now back at bargain basement prices, home prices are too. The National Association of Realtors said Monday that sales of existing homes fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October, from a downwardly revised pace of 5.14 million in September. The median sales price plunged 11.3 percent from a year ago to $183,000. That was the largest year-over-year drop on records going back to 1968, and the lowest median sales price since March 2004. The S&P Case-Shiller Home Price national index recorded a 16.6% decline in the third quarter compared with the same period a year ago. Prices in Case-Shiller's separate index of 10 major cities fell a record 18.6%, while its 20-city index dropped a record 17.4%

Home prices are currently at great levels for home buyers, but not so great for those refinancing if they happen to live in a severely depressed region. It is always best to get a handle on your home value before refinance shopping, so that you know where you fall on the loan-to-value scale. Since refinance rates are so low, those with adequate equity in their homes can stand to receive nice savings in the current environment.

Most feel that the current low mortgage rates should hold for a while. It is a little less clear as to whether rates will drop further. There is not much room left for the bond yields to go lower, but the mortgage risk spreads should tighten on the government announcement. It is quite possible that bond yields could go up as the economy recovers, while the mortgage spread declines with lower risk. In that event, we could stay at these levels for quite some time. But hey, that’s a good thing for those refinancing, as rates are in a great spot now.


May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Consumer Price Drop May Help Mortgage Rates in Short Term

A dirty word as far as mortgage rates go, is “inflation”. The CPI numbers reported today showed a huge drop in consumer prices and a boost in confidence for those concerned about inflation in our economy. Consumer prices dropped by 1 percent last month, the largest amount in the past 61 years as gasoline pump prices dropped by a record amount.

The reaction to that announcement was met by a nice decrease to an already declining 10-year treasury yield. The current yield is approaching the January 2008 lows, which also offered the best mortgage rates by historical standards. While some worry that we could enter a period of deflation with continued drops in prices, most economists believe that current conditions are not likely to set the stage for a deflationary period, such as witnessed in the Great Depression.

The current mortgage spread premium continues to hover near all-time highs, which may hinder the full effect of the falling treasury yield, but expect at least a short-term dip in rates. Whether the dip lasts one day or several weeks, I will not venture to guess, as current market conditions are affecting mortgage rates at a furious pace.

On the negative side for housing, it was also reported today that construction of US homes fell by 4.5 percent in October as home builders have cut way back. This represents the lowest level on government records dating back to 1959. It appears that tighter lending standards, rising foreclosures, and fear of the housing market’s value have kept many potential homebuyers on the sidelines.

Look for continued government intervention to curtail the current housing slump. Hopefully it will come in the form of assistance to troubled homeowners along with programs aimed at stimulating buyers to step up and purchase homes. Home stabilization is the key to our ailing economy and future growth of our nation.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Is The New Federal Mortgage Relief Plan Enough To Help Ailing Economy?

The government announced yesterday, it’s latest effort to help troubled homeowners, but will it really help?

On the surface, it appears like a great plan to help people stay in their homes and to keep newly foreclosed homes from entering the market. Qualified borrowers would receive help in a few key ways. Their interest rate would be reduced so that the borrower would not pay any more than 38 percent of their gross income on housing expenses. Home loans can be extended up to 40 years and in some cases, some of the principle can be deferred, interest free.

To qualify, the homeowner will have to be at least 90 days late on their mortgage and would have to owe 90 percent or more of their home’s value. Investment property owners and those in bankruptcy would not be eligible.

Now for the catch. The plan is focused on loans owned or guaranteed by Fannie Mae and Freddie Mac. The problem with this is that although they are the dominant owners of mortgages in the US, their portfolio only represents 20 percent of delinquent loans.

The vast majority of troubled loans have been packaged into complex investments that are very difficult to unwind. Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged and sold in slices to investors worldwide. Most of those loans won't likely be helped by the new plan.

Citigroup and JP Morgan are expanding their mortgage modification programs, which in reality, may be a good sign of things to come. Modification and forebearance from the private sector will be good for all involved and help to make a significant dent in current expanding foreclosure rates.

As for further government assistance to troubled homeowners, a much better plan needs to be implemented in my opinion. Current government actions have been woefully inadequate and almost laughable in contrast to the mortgage bailout for big business.

Home value is key to our entire current economic problems, and a true effort by the government to help ailing homeowners would give the housing market the jumpstart needed to begin economic recovery.

Too often, economic matters come down to dollars and cents, leaving common sense out of the equation. People are hurting and experiencing tremendous stress as they lose, or are about to lose their homes. We should expect a much better plan to help the common person than what has been received.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Will the President-Elect Obama Administration Help the Ailing Housing Markets?

Congratulations to president-elect Obama and the hope his election brings for change in the economy and housing markets. No one can predict if his administration will help our ailing business environment, but hey, he can't do any worse than his predecessor.

Hopefully, the newly formatted staff on capital hill will enact legislation aimed at stabilizing housing prices. This is the number one area of concern for the revitalization of the economy in my opinion. The stabilization effort needs to be attacked on two fronts. The first being real legislation aimed at keeping struggling homeowners in their homes. The second front should be aimed at stimulating home buyers to purchase new and existing homes. Continued depreciating home prices will only continue the downard descent of our economy.

On the mortgage refinance rates front, the thirty year fixed rate jumped to 6.47 percent last week as mortgage purchase and refinance applications took a slide. Mortgage lenders are still hoarding cash and keeping the mortgage spread premium at higher than normal levels. This coupled with last week's jump in the 10-year treasury yield has caused the bump up in interest rates.

Those refinancing now are still in good shape on a historical level as a 6.5 percent 30 year fixed rate is relatively low. The 10 year yield has dropped a bit this week and we are experiencing a slight drop off that 6.5 percent level for those looking to lock a rate now.

Keep an eye on upcoming housing numbers as this will be a leading indicator for not only refinance rates, but the economy as a whole.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Home Sales Up While Refinance Rates Little Changed on Week

Sales of newly constructed homes rose in September, according to the monthly report from the U.S. Census Bureau, moving up 2.7% from August. You might think this is a good sign for our ailing housing market, and maybe it is, but sales are up where prices are the lowest. At least bargain hunters are now entering the home purchase market and that is a welcome change. On average, home prices are down almost 10% nationwide and still weighing heavy on the refinance and home purchase mortgage lending business.

Mortgage refinance lenders are still not stepping up to the plate and all indications are that increased lender participation for mortgages will remain flat until housing stabilizes.

For the week, mortgage rates have been somewhat stable as the 10 year treasury yield continued it's yo-yo movement, but in the end remains constant.

The future of home sales is really uncertain, but is now becoming affected by job losses. One of the most important factors affecting home sales is of course jobs, but with current economic conditions, it may be some time before level out on the job front.

Look for continued volatility for refinance rates as we finish up with 2008, and good riddance! Again, if you are considering a refinance now that will provide you with solid benefit, look to lock on the dips. Mortgage refinance rates are still in great shape on a historical perspective.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Refinance Rates Dip On the Week

Refinance rates dipped on the week, mainly due to the drop in the 10-year treasury yield. The yield dropped almost one-half percent since last week and is being reflected in mortgage refinance rates.

The mortgage markets have been a see-saw all year and this weeks action is just a continuance of business as usual. I have harped on this before, but if you are considering a refinance or out and out need to refinance, it's a good idea to lock on the dips.

If this year is any indication, rates could go up and down in significant percentage moves for some time to come.

The short term credit markets have opened up a bit, which is good news for everyone, yet long term credit lending such as mortgages, are still tight. Some very good news for the economy and possible refinance rates is the reduction in oil prices by 50 percent. This deflationary event could bring more investors to long term treasuries and help to stabilize low interest rates on mortgages.

Housing prices are still deteriorating and new construction is down big time due to the excess inventory of homes. We really need a stimulus for home buying to truly bottom out, not only in home values, but the economy as a whole.

May the Mortgage Rates be with You!

Refinance Tool Box

Refinance Rates Nudging Upward for Week

Refinance rates have increased steadily over the past week by an average of about one quarter point. The stock market chaos has sent the 10-year treasury yield up and down like a yo-yo, but the real driving force behind rates as of late continues to be the mortgage spread risk premium.

Refinance lenders are becoming tighter and tighter with their cash and are bumping up the mortgage interest rates to account for the risk.

Again, most of the lender risk is derived from housing values. The goverment bailouts of financial institutions for bad debts and the direct cash infusion for banks will not do anything to lower the spread premium though, not until home prices stabilize.

In my opinion, the government should be focusing on real measures to help people to retain their homes and also get people purchasing homes. Yes, mortgage application guidelines should be met, but we need a stimulus to get homebuyers buying. Downpayment assistance, lowered rates, something with teeth that will actually jumpstart the home buying. My guess is that we may hear of some goverment action in this area, but hopefully the sooner than later.

May the Mortgage Rates be with You!

Refinance Tool Box

Refinance Rates Very Near Year's Lows

Mortgage refinance rates are very near the year's lows as the mortgage spread premium dropped about .35%, while the 10 year treasury yield continues it's descent.

Huge news with Lehman going under, Merrill taken over, and AIG liquidity issues have led to a flight to the safety of bonds, which is good for mortgage rates ... maybe not so good for the economy.

The government's takeover of Fannie and Freddie is playing a big part in the mortgage spread decline. As investors feel more secure in mortgage backed securities, the risk premium declines and mortgage refinance rates go down.

Housing numbers and values are still taking a beating, but at least we have one bit of good news on the inflation front. Oil has finally dipped below the $100 per barrel mark. This can go a long way toward curbing inflation and helping our economy.

These are in deed historic times on Wall Street and expect more wild flucutation in refinance rates. The good news now is that rates are low. The bad news is that property values are still suffering with no clear stabilization in sight.

The dwindling landscape of big investor money players such as Lehman and Merrill, along with fear of other big firms facing bankrupcty does not look good for near term investor confidence in the home finance markets.

If we have learned anything this year, it's to refinance on the dips. Today's low rates can be gone in a day. 10 year treasury yields can go up rather quickly, along with the mortgage risk premium in today's economic environment.

For those that are refinancing now or looking to refinance, now is a great time to lock while rates are low.

May the Mortgage Rates be with You!

Refinance Tool Box