Mortgage Rates Continue To Fall
While the expectation has been that mortgage rates would start to rise they have fallen for the last 2 weeks. This week the 30 year rate fell from 4.98 to 4.91 (last week it fell from 5.03 to 4.98). Besides October 8th its the lowest rate we have seen since the start of the summer. So how does 4.91 fit in with historical mortgage rates. Its lower than any point before March 26, 2009. Its also the 11th lowest recorded rate in history (all of the 10 lower recorded rates occured in 2009).
While the 30 year mortgage rate is the most watched rate the other 3 major mortgage products fell as well. The 15 year rate fell from 4.40 to 4.36. The 5 and 1 year arm fell from 4.35 to 4.29 and 4.47 to 4.46. The 1 year arm is now higher than the 5 year arm and the 15 year arm. Below are rates from the weeks from Nov 12th, 2009 to October 15th, 2009.
Nov 12, 2009
30 4.91 | 15 4.36 | 5 4.29 | 1 4.46
Nov 05, 2009
30 4.98 | 15 4.40 | 5 4.35 | 1 4.47
Oct 29, 2009
30 5.03 | 15 4.46 | 5 4.42 | 1 4.57
Oct 22, 2009
30 5.00 | 15 4.43 | 5 4.40 | 1 4.54
Oct 15, 2009
30-yr 4.92 15-yr 4.37 5-yr ARM 4.38 1-yr ARM 4.60
Apr 23, 2009
30-yr 4.80 15-yr 4.48 5-yr ARM 4.85 1-yr ARM 4.82
At this point the 1 year arm, being higher than the 5 year arm, is out of the picture. The 5 year arm is substantially lower than the 30 year rate. But it still seems like a worse option than the 30 year mortgage. First the 30 year rate is pretty low (the 11th lowest rate in history). In addition the expectation is that rates will move up so the benefit of getting a lower rate with a 5 year arm is outweighted by locking in for a short period of time.
In addition to rates its also interesting to look at mortgage payments. We took today's rates and using a mortgage calculator determined the payment for a 200k loan. We also did the same thing with rates from October 29th and April 16.
5-year ARM $988.56
1-year ARM $1008.62
5-year ARM $1003.88
1-year ARM $1021.7
5-year ARM $1052.96
1-year ARM $1051.74
Compared to two weeks ago a payment is 1.35 percent lower and for a 200k mortgage payment the payment is $14.65 less now than it would have been two weeks ago. While this is not a huge difference its not totally insignificant.
So what is our advice to people currently looking to get a loan? With rates near historical lows its probably a good idea to lock in rates earlier rather than later. While their is a chance that rates could move lower its doubtful they could fall too much lower than where they stand today. On the other hand there is more of a risk of mortgage rates moving up in the next few weeks.
by: Ki GrayAbout the Author:Ki lives, and works, in Austin, Texas. He maintains a website escapesomewhere.com for future buyers of Austin real estate. The site offers information on historical mortgage rates along with a mortgage rate widget.