Just In Time?

As I am writing this, fixed interest rates for conforming loans, now up to $333,700, are trying to test the lows of last summer. They still aren’t quite there, but within a whisper for the 30 year fixed. The bad news is that Jumbo rates and the 15 year rates don’t seem to be participating in this rally. The good news is that mortgage rates are falling just in time for the traditional spring home buying season! The other good news is that the loan pipelines are empty at most of the lenders. What this means to you is terrifically fast approval process when the lenders receive your loan file. The time it takes to get the file to the lender has also been slashed. Last summer appraisers were taking over 4 weeks to appraise your home, now appraisals are delivered in less than a week. On top of all this good news, because the lenders’ pipelines are so empty, the loan that may have been declined last summer has a better chance of being approved now!

Who knows how long rates are going to stay down here? My crystal ball is obviously in need of a tune up; but when rates are moving closer to a 40 year low, the most logical move for them next is up, not down much further. After all, the Wall Street bond traders who control long term interest rates can make money only by bonds going up or down, not by them remaining the same.

Is it a good time to sell your current home and move on up to that dream home that has one more bedroom, a bigger master bath, or just more room? Obviously this is a question that only you can answer, but the rates are coming down Just In Time!

Interest rates for conforming loans (under $333,700) as of 1/20/04 (a.m.) are:
(zero point option, for 2 points the rate is about a half point lower)

30 year fixed: 5.5% (APR 5.59%) payments are $1,894.71/mo.
15 year fixed: 4.875% (APR 5.03%) payments are $2,617.20/mo.

The Year In Review

Looking back over the year, we saw mortgage rates hit 40-plus year lows and then go lower! The ensuing stampede of homeowners to refinance overwhelmed many of the businesses related to mortgages: brokers, lenders, escrow and title companies, appraisers, etc. who saw their backlogs jump from a few days to over a month.

In retrospect, none of our lenders who had locked in an interest rate failed to deliver on that rate, when a failure to close in the “lock-in period” was due to their (the lender's) ability to perform or even when it took an appraiser a month to appraise the house. The trend in our offices was that most mortgage borrowers tended only to refinance existing balances and not take equity out of their homes.

There were exceptions, mostly where borrowers had lost jobs, run through savings and run up their credit cards. I heard remarks that now that the credit cards were paid off, the cars were financed at 0 percent, and they were expecting to reduce house payments by hundreds of dollars and stick the savings into the bank.

Economic reports are verifying this. Consumer savings are up and credit card debt has eased over the last year. Although the real estate sales market wasn’t as red hot as I would have expected, it is starting to show signs of improvement. Houses that are competitively priced are selling in a relatively short period of time- less than 3 months- with few concessions being offered by the sellers. There just aren’t many sales happening! This is probably due to the realization that “why would I want to sell now when I’ve refinanced down to this great payment?”

Will interest rates stay low? I certainly can't argue with the Federal Reserve board, which has publicly stated that they expect interest rates to remain low “for the foreseeable future”.

Point of fact is, as of today, mortgage rates are only about a quarter percent higher than the lows of last summer!

The new conforming loan limit for 2004 for single family houses is $333,700.

Fixed Rate Mortgages for conforming loans (under $333,700) as of 12/19/03 (a.m.) are:

(0 point, for a 2 point loan subtract about 3/8 percent from the rate)

30 year fixed: 5.625% (APR 5.71%) payments are $1,920.97/mo.
15 year fixed: 5.125% (APR 5.26%) payments are $2,660.66/mo.