Mortgage Rates Report: May 12, 2008
by: Brian.Brady on May 12, 2008 06:59:36 3 comments »
Mortgage rates dropped, then rose to their original level, last week. I’ve been advising mortgage borrowers to lock all rates at application, regardless of closing date. Did I miss an opportunity to improve clients’ rates? I don’t think so. My approach is more one of limiting losses than improving gains and last week, I thought there was a threat of higher mortgage rates; I still do.
Inflation data is released Wednesday and Unemployment data is due out Thursday. These two figures could be the tempest in the teapot and really affect mortgage rates. We just think there is too much risk to be floating (holding out for a better rate). If markets overreact (and they usually do) we’ll change that recommendation but for now, we think it’s prudent to lock your mortgage rates.
Currently, the 5/1 ARM offers the best value at 4.875% wholesale rate. The 30 year fixed rate loan is 5.875% wholesale rate. While there is risk in losing the rate after 5 years, most borrowers don’t hold a mortgage that long. If you are thinking of moving in the next few years, it would be well to examine the benefits of refinancing your home loan to a low 5/1 ARM rate.
Contact me at (858)-777-9751 with more questions.
· http://www.straighttalkaboutmortgages.blogspot.comHey Brian,
I wanted to ask your opinion, I’ve been getting a lot of people asking me about ARMS, and most of them are scared of ARMS. In light of the tightening of the credit markets, do you think there is any risk that people who take out an ARM right now could end up with a problem in 5 years IF they decide to stay put and aren’t able to refinance?
I’d like to hear your opinion on that.
Thanks!
Tom Vanderwell
Permalink May 12, 2008 19:28:36 · http://www.neworleanscondostrends.comThats a great tip. In this market no one mentions the 5/1 arm and I do not know why as it makes sense to a lot of people.
Permalink May 12, 2008 20:00:54 That depends. A mortgage is a financial instrument and as such is personal. I would “prescribe” a 5/1 ARM for most folks who are refinancing because the odds of them staying in that mortgage, for more than 5 years, are low. Purchases are often made with a set time frame so we can “match up” the expected hold time to the fixed period.
I’m not certain the credit crunch will last forever. However, higher home prices will present great opportunities for “equity harvesting” which requires a refinance. Did I suggest that home prices should be higher in 5 years than they are today?
Yep…I did.
Eric:
I do agree; ARMs are underutilized today
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