Orlando Mortgage Blog

Rates Jumped Now What?

June 21st, 2013 12:21 PM by BILL WILBANKS

 

Yes long term rates jumped the most in just the last two days than has been seen in the last four years. And yes rates will continue to go higher at some point as the economy improves. But no one can say how fast or how high. Ok, but let's not fall off a cliff before we look at some real effect of what this means in the short run. First of all I don't believe water has found it's own level yet. The Bernanke "Speak" that shocked the market has been (I believe) an overreaction that has to shake out. Don't be Lemmings jumping out of the mortgage market.

First of all with the 10-year Treasury currently sitting at 2.51% this morning that represents the highest level seen in the market since August 2011 according to historical rate data available at www.federalreserve.gov:

            Month        10-yr rate

  • 2011-08     2.30 
  • 2011-09     1.98
  • 2011-10     2.15
  • 2011-11     2.01
  • 2011-12     1.98
  • 2012-01     1.97
  • 2012-02     1.97
  • 2012-03     2.17
  • 2012-04     2.05
  • 2012-05     1.80
  • 2012-06     1.62
  • 2012-07     1.53  LOW POINT
  • 2012-08     1.68
  • 2012-09     1.72
  • 2012-10     1.75
  • 2012-11     1.65
  • 2012-12     1.72
  • 2013-01     1.91
  • 2013-02     1.98
  • 2013-03     1.96
  • 2013-04     1.76
  • 2013-05     1.93
  • Today         2.51  at 11:38 ET Up 7 B.P. since opening

Ok, let's look at the impact on the numbers. For each $100,000 loan financed on a 30 year fixed basis the principle and interest payment changes $7.23 for each 0.125% (1/8) move in the interest rate up or down (compare that to adding just a $1,000 worth of options to a new car, that typically adds $19.00 monthly to the payment). So the average increase in rates on this product we saw this week looks like around 0.50% (though the weeks not over yet); so 4 times $7.23 or $28.92 monthly increase in payment would be the impact of that 0.50% rate increase. We need to take the hyped market news in perspective folks. I contend that is in no way the end of the world for a borrower looking to buy or refinance unless they are on the cusp of qualifying, and depending on their current rate if refinancing. A fixed rate in the 4's is still a remarkable rate and lower than my parents had on their mortgage in the 1950's. Yes, rates may edge down at some point, but can you risk that gamble as home prices also rise if you are buying new or existing at the same time rates rise? If your rate is over 5% now as millions in the country are you need to take a look at your options now? If you are paying high interest rates on other debt especially if it's not fixed, can you afford not to roll them into a lower mortgage rate while you can? Really?

If you are not ready now yourself...don't you know someone in your family or circle of friends who might be? It would be a real travesty to let this pass us by. I'm local and I put my pricing and service up against anyone every day. Let me see what we can do to save you some money. Please call me today.

Bill Wilbanks

 

Posted in:General
Posted by BILL WILBANKS on June 21st, 2013 12:21 PM

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