May 1st, 2008 3:45 PM by BILL WILBANKS
6/05/08 Update - Yes they did: 30 yr fixed O/O purchase, 0 pt, 30 day rate is at 6.125%. On 5/01/08 it was at 5.75% assuming a 720+ credit score.
They don't show much sign of going too much lower folks, though I'd love to be proven wrong. Rates could easily begin to go higher with the building market pressures from inflation, unemployment numbers and the unknown post Bush world. Why do you care?
Well you should care if you are thinking of buying, but have been waiting for the values to go down just a little more before you jump in. Or, if you have been thinking of refinancing your current financing package, whether it's an ARM due to adjust in the next 1 to whatever number of years; you have been thinking of extending that 15 year fixed to a lower 30 year payment or just want to take some cash out of your home and roll in that HELOC that can move monthly with Prime Rate. Most experts believe home mortgages will get more expensive. The question is if so, when?
The Fed's have now dropped 325 basis points (bps) from 5.25% with very little effect on the bread and butter 30 year fixed rates and with very little expected to go at this point from the Fed at 2.00%.
Adjustable rate borrowers have benefited on this year's rate reset, because of the Fed cuts, if they were up for one, seeing little if any change from where they were for the next 12 months until the next adjustment period. But, 12 months later they'll be post election, facing an unknown taxation impact on payroll taxes, inflation and market conditions that most believe will see an increase in rates as the Fed begins to bump it up to control those building inflationary pressures. If you don't need cash out or a term extention, believe it, your refinance for a better rate will become less and less attractive as rates move up.
If you didn't know it, second mortgage fixed rates have already been going up and allowed loan-to-values (LTV) have been going down with most lenders as they are seen as higher risk offerings in declining value markets. Many HELOC lenders have limited or reduced already approved lines and have become much more restrictive on what they are approving. Cash out first mortgage transactions are still attractive in many cases today as second mortgages tighten up.
So, it's not just bottom fishing on purchase price if rates begin to climb and cash outs on todays 6+% range may still be very desirable looking back from now to 24 months in the future. Just consider it folks...
These may soon be looked back upon as the good old rate days!
Bill Wilbanks / www.OrlandoMortgageMasters.com