Mortgage Rates Going Up?

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giltee_IHB

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Hey All,



I was trying to access a video link on CNBC.com (http://www.cnbc.com/id/15840232?video=655830354&play=1) about mortgage rates going up instead of down, and couldn't due to the Internets being broke. I noticed that a sweet 5% 3/1 ARM from my credit union jumped up to 5.125% and now 5.25% over the past three weeks, and was hoping to get some insight on why this is happening and what the future will hold.



Anyone have any thoughts on this (or is able to translate what was said at CNBC.com about this)?



Thanks,

giltee
 
<p>Yes, some rates have been climbing steadily. 30-years and longer duration ARMS more so than the 3/1. Long rates are being driven higher by increases in long-bond yields:</p>

<p><a href="http://www.marketwatch.com/quotes/quotes.aspx?symb=TNX&sid">http://www.marketwatch.com/quotes/quotes.aspx?symb=TNX&sid</a>=</p>

<p>Big jump up in the 10-year again today... Won't be able to find a conventional 30-year under 6% soon.</p>

<p>The 3/1 and 5/1 ARMs have moved up only slightly. If the Fed drops rates again in March, the 3/1 rate should drop as well. I have been waiting for 4.5 or 4.625 on the 3/1 ARM to refi my place and lock my rate for another three years...</p>

<p>5.25% on a 3/1 ARM is not a very good rate IMO, especially from a credit union, which tends to charge much higher transactions fees. You can get a conforming 3/1 for 4.75-4.875 right now:</p>

<p><a href="http://www.mtgcapital.com/ratesheet-adjustable.html?state=ca&rs=adjustable&r=1">http://www.mtgcapital.com/ratesheet-adjustable.html?state=ca&rs=adjustable&r=1</a></p>
 
Thanks, ipoplaya. Forgot to mention that the rates I'm looking at are for 3/1 jumbo. Might just have to wait till March w/ fingers crossed.
 
As it has been explained to me, mortgage rates rise inspite of the fed cutting interest rates due to the fact that banks are strapped for cash. Right now banks can get money at the lower rate, but to make up for their bad investments banks can generate more money by keeping mortgage rates level or even increasing them. They are increasing their margins. Is this correct or am i way off? I only just heard this two days ago and i'm kinda wondering why i hadn't heard it earlier. The previous explanations had been "it's complicated as the mortgage rates aren't tied directly to fed cuts".
 
<p>I think in general jc, that is probably BS. Long-term mortgage rates have very little to do with Fed rate cuts. Shorter term products, like 3/1 ARMs, are much more sensitive/responsive to Fed rate moves. </p>

<p>Longer term mortgage rates are rising because the long bond market appears to be pricing in and expecting inflation. Lenders are going to raise their mortgage rates as their expected future cost of money increases as a result of inflation. </p>
 
For what it's worth, also forgot to mention that the current 5.25% on my credit union jumbo (which was just 5% three weeks ago) comes at 0 discount points (but a 1% orig. fee, which can be waived for a .25% increase in interest rate). Oddly enough, as I was writing that parenthetical, I realized they also raised the orig. fee from .75% to 1% recently.
 
Then Fed cuts <u>DO</u> affect the long term mortgage rates. Lower fed funds rates and discount rates = increased money supply = inflation fears = long term rate increases.
 
Also, banks are pricing in additional risk now with each loan they originate / fund. This in addition to what LM just said are having an impact on mortgage rates.





Mortgage rates are tied most closely to the 10yr Treasury Note.
 
Look for long terms rates to continue trending upwards through 2008. If you were looking to refi with some great rates you missed your chance a month ago when you could get a 30yr conforming fixed at 5%. Its all uphill from here on out, i'm afraid.
 
Interloper





Depending on what happens with conforming rates their is a posibility that giltee could get a conforming loan from FNM or Freddie...but I think the chances are slim.
 
Check this:





<a href="http://www.reuters.com/article/bondsNews/idUSN1959403020080219">US mortgage rates post record daily move-BestInfo</a>


Reuters - February 19, 2008 4:35 PM ET





NEW YORK, Feb 14 (Reuters) - The average rate on a 30-year U.S. mortgage with no upfront points jumped 3/8 percentage point on Tuesday to 6-5/8 percent, in the biggest one-day move in the ten years that BestInfo Inc. has tracked the rates.





"Today's 3/8 percent increase in the Mortgage Point Monitor in one day is unprecedented in the 10-year history of the series, either in the up or down direction," David Beadle, president of BestInfo, said in an e-mail.





The 30-year mortgage rate with one upfront point rose by 3/8 percentage point to 6-3/8 percent.





The 30-year mortgage rate with two upfront points also increased by 3/8 percentage point, to 6-1/8 percent.








Could have posted this in headlines but thought it fit nice here
 
I want to provide an update that I was finally able to access the CNBC video I referenced in the OP. Most of what was discussed was gobbledygook to me -- something about the bond market that could be a hopeful sign for mortgage rates returning to their Jan. 2008 lows in the short term, and something about banks dumping their mortgages that could be a less-hopeful sign for mortgage rates in the short term.



I'll take the anaylst's ambivalence with optimism that my credit union's 3/1 jumbo ARM rate will go back down w/in the weeks ahead. In other words, I'll continue to cross my fingers.
 
Just in time for those jumbo loans!!! I was reading an article about how long its going to take to actually get the pricing integrated into Fannie Mae and Freddie Mac's automated underwriter.
 
I think whatever disaster is gonna happen will happen long before any stimulous package has a chance to do anything. Not that I think it would do anything anyhow, and not that I know anything to do, but whatever it would be, would have to be super fast, and it's not possible to go that fast.
 
<p>Sure liz, the stimulus package will do something. It will fuel the inflation engine that is already picking up pace. It will put a coupla hundy into people's hands and drive long mortgage rates up even further.</p>

<p>Hey IR - if I recall your posts from a while back, I think you said buying a place at the peak of an inflationary period was good. Low purchase price, can always refi later, ... I think inflation will give this bubble correction its 2nd wind before too long.</p>
 
Footnote: at close of business today, the credit union raised the rate for the 3/1 jumbo ARM yet again, another .125% to 5.375%. I had printed out the rate sheet to read all the fine print, so I'm now looking at a rate sheet printed out today that doesn't match what is posted on the Web site today. Vertigo has set in.
 
Just so you know, your credit union is more than likely working with a mortgage broker. All credit unions that I know "outsource" their mortgage lending to other institutions. They don't have the reserves, nor the infrastructure to sell-off to the secondary market. They are not federally chartered banks or thrifts.
 
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