February 21st, 2008 4:06 PM by BILL WILBANKS
March 14, 2008:
Here's an update to the 2/21/08 post shown below. It's remarkable how fast this market can change today. Remember the old saying, "If you don't like what you see now, wait a couple days, it will change"? Of late, it's blink and it will change. The 5 year ARM pricing had been running .75% to 1% below 30 year fixed rate pricing recently making it attractive once again to many borrowers. In the last 7 to 10 days that same spread comparison has dropped to zero, flat and even "higher" than a 30 year fixed rate based on many lenders reducing or deleveraging mortgages held. We're having fun now!
They sure appear to be getting more attractive by the day. Especially if your primary goal is lowering the Payment. In the recent past, let's say within the last year or so, the "close to" inverted yield curve (when short term rates are near or even exceed long term rates) and product qualification guideline changes had generally left ARM loans less than attractive, since the rates were almost parallel to fixed rates for quite a while; so take a fixed rate.
In recent weeks and months the inverted yield curve has improved to the point where ARM mortgages once again have a more attractive spread and therefore greater payment gap compared to a typical 30 year fixed. This can be attractive for borrowers that intend to only remain in the mortgage for the next 5 to 7 years and want the lower cost while they are in the loan. I believe 1 year to 3/1 ARM terms still carry too much uncertainty compared to a fixed rate loan right now. New qualifying guidelines since August, 2007 have taken away prior advantages such as qualifying on the lower starting rate discussed in an earlier blog comment. But, if getting a lower payment is your goal, there are once again noticable rate differences in many instances today, including Jumbo loan programs. Call and discuss these options with us today. And click on Why Interest Only in the left column for more options.
Bill Wilbanks / www.OrlandoMortgageMasters.com