Archive for January, 2010

Mortgage rates recede for 4th week

Thursday, January 28th, 2010

Mortgage rates fell for the fourth consecutive week.

The benchmark 30-year fixed-rate mortgage slipped 2 basis points this week, to 5.13 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.49 discount and origination points. One year ago, the mortgage index was 5.48 percent; four weeks ago, it was 5.33 percent.

The benchmark 15-year fixed-rate mortgage also edged down 2 basis points, to 4.54 percent. The benchmark 5/1 adjustable-rate mortgage dropped 9 basis points, to 4.54 percent.

Weekly national mortgage survey
Results of Bankrate.com’s Jan. 27, 2010, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
  30-year fixed 15-year fixed 5-year ARM
This week’s rate: 5.13% 4.54% 4.54%
Change from last week: -0.02 -0.02 -0.09
Monthly payment: $898.91 $1,265.61 $839.96
Change from last week: -$12.23 -$8.47 -$14.80

Big plans, modest results

The government’s latest effort to spark new life into the nation’s slumping housing market appears to be yielding modest results, according to mortgage professionals in three hard-hit states.

Late last year, Congress expanded eligibility for the federal homebuyer tax credit to “move up” purchasers who own a home but plan to sell it and purchase new digs. Previously, the credit had been limited to first-time buyers.

In South Florida, the expanded tax credit likely has helped boost sales interest, says Jim Sahnger, mortgage consultant for Palm Beach Financial Network in Stuart, Fla.

“People are looking to take advantage of any opportunity to save money,” he says.

However, Sahnger says that although there has been “a definitive increase in contracts that are being written,” it’s difficult “to peg the increase to any one thing.”

He adds that in addition to the credit, other factors such as falling home prices and reduced inventory also are “creating a little more incentive for people to do something right now.”

Across the country in Southern California, sales activity initially picked up in the wake of the credit expansion before turning more sluggish recently, according to Jeff Lazerson, president of Mortgage Grader, a Laguna Niguel, Calif.-based mortgage technology and management company.

“We saw a pretty good spike toward the end of the year,” he says. “Then, oddly enough, January has started out molasses slow.”

Lazerson and his colleagues are “sort of scratching our heads (as to) why that is.” His hunch is that the economy may be faltering anew, sending home shoppers back to the sidelines.

“I think most people are just hunkered down waiting to see if and when things get better in the economy before they make a move,” he says.

In western Michigan, sales activity is starting to increase after the usual holiday lull, according to David Kuiper, a certified mortgage planning specialist with First Place Bank of Holland, Mich.

“I can’t say that I’ve noticed a rush of move-up buyers,” Kuiper says. “After all, they still need to sell their homes in this challenging market.”

However, he says clients who have been fortunate enough to sell are looking forward to using the credit.

“There certainly is excitement in the air,” Kuiper says.

Sellers who have dumped their property at a bargain price view the credit as a financial balm to soothe the pain of “lost” equity, Kuiper says. Others plan to use the credit to pay for moving expenses or improvements related to their new homes, he says.

Time growing short

Meanwhile, time already is growing short for buyers hoping to land a great deal before some key changes occur.

Later this spring, the federal homebuyer tax credit — up to $8,000 for first-time buyers and up to $6,500 for move-up buyers — is scheduled to expire. Buyers must have their new home under contract by April 30, and the transaction must close within 60 days after that.

Mortgage rates also may start to climb soon. In late 2008, the Federal Reserve began a $1.25 trillion campaign to purchase mortgage-backed securities and drive borrowing costs lower. The policy is scheduled to end in March, and Sahnger agrees with many experts that mortgage rates subsequently could rise anywhere from a half-point to a full point.

“We’ve had these low rates in effect for over a year,” Sahnger says. “People have the tendency to think this is where rates should be. Well, they’re not. Rates are artificially low and it’s only based on the impact from the Federal Reserve.”

Kuiper says if rates do move higher, shoppers waiting for the absolute bottom of the housing market may regret their procrastination.

“A slight increase in interest rates can wipe out any savings achieved by waiting for a lower sales price,” he says.

Lazerson urges shoppers to “get their ducks in a row” if they hope to secure a purchase before the looming spring deadlines.

“Now more than ever, it’s really important to know what your level of qualification is before you go and look for a property, because so much has changed in the last two or three years in underwriting,” he says.

“Every day, when we have contact with people, they just are surprised at the rigor involved in getting a loan together versus what it was just a couple of years ago.”

If you’re in the market for a mortgage or refinance, you can look for the best interest rate by searching Bankrate’s rate tables.