It Is Time

I have been hesitant to get people moving on refinancing for fear that by the time they got everything together, the current mortgage rates would be gone. It appears that they will be around for the near future; how long they will last is anybody’s guess.
The biggest plunge came about at the end of November when the Federal Reserve said they were going to buy mortgage backed securities (MBS) and help lower mortgage rates. They haven’t yet followed through with their policy statement but the mood of the market is that they will. They (the Fed) said they are frustrated by the failure of lenders getting back into the market and, by doing so, lowering the rates. There are countless reasons for lenders to stay out of the market, many of their own doing, but this hasn’t helped the country (and the world) start digging out of the hole that these same lenders put everyone in.
A quick primer on mortgage rates: historically they have had a “spread” of 1-2 percentage points above the yield of the 10-year US Treasury bill. In the last 2 years, that spread has been as high as 3 points due to the lenders not having the confidence that their investments in MBS were safe. It was an uncertainty that was largely their doing, but I digress. To that end we are now seeing the spread reduce to the mid-2’s, and mortgage rates drop to the upper 4’s for 30 year fixed loan under $417,000
The market has all but eliminated the 0 point option for loans and has made the very best rate and point quotes at near a 1-point price. For loans between $417,000 and $625,000 (the new “agency high-balance” loans) add another point in fee.
Most of the time, this will get your rate and fees locked in for 30 days, and anyone who has witnessed the manic-depressive market lately would be prudent to lock the rate and never look back.

Current fixed rates for loans under $417,000 as of 12/22/08 (a.m.) are:
(Rates quoted are for 1 point loans)
30 year: 4.75% (APR 4.90%) payments are $2,175.27/mo.
15 year: 4.375% (APR 4.635%) payments are $3,163.45/mo.

Posted by bruce at December 22, 2008 12:20 PM