Mortgage Rates Continue To Rise: Are Sub 5 Rates Gone Forever?
So are sub 5.0 rates gone forever? The short answer is probably yes
. While rates might briefly fall below 5 in the next month for the most part the era of sub 5.0 rates is over. Mortgage rates rose for the third straight week. The thirty year rate rose from 5.00 to 5.03. The 15 year rate rose from 4.43 to 4.46. The 5 and 1 year rates rose from 4.40 to 4.42 and 4.54 to 4.57. Its interesting to note that the 1 year arm has had a higher rate than the 5 year arm for the last few weeks. Below are rates for the last few weeks.
Oct 29, 2009
30-yr 5.03 15-yr 4.46 5-yr ARM 4.42 1-yr ARM 4.57
Oct 22, 2009 Share:
30-yr 5.00 15-yr 4.43 5-yr ARM 4.40 1-yr ARM 4.54
Oct 15, 2009
30-yr 4.92 15-yr 4.37 5-yr ARM 4.38 1-yr ARM 4.60
Oct 08, 2009
30-yr 4.87 15-yr 4.33 5-yr ARM 4.35 1-yr ARM 4.53
Oct 01, 2009
30-yr 4.94 15-yr 4.36 5-yr ARM 4.42 1-yr ARM 4.49
Apr 02, 2009
30-yr 5.05 15-yr 5.13 5-yr ARM 5.00 1-yr ARM 4.78
The only two mortgage products that are interesting is the 30 year and the 15 year fixed rates. With 1 year rates higher than the 5 year arm they are obviously pointless. And with current rates low compared to historical mortgage rates the lower rates of the 5 year arm (compared to the 30 year rate) don't seem worth the risk. In addition to mortgage rates lets look at mortgage payments. Taking today's rates we can translate them into a payment for a 200k mortgage. We did the same thing with rates from October 15th (2 weeks ago) and April 2 (6 months ago).
5-yr ARM $1003.88
1-yr ARM $1021.7
5-yr ARM $999.16
1-yr ARM $1025.28
5-yr ARM $1073.64
1-yr ARM $1046.91
A mortgage payment is about $13 more than 2 weeks ago and about $2 less than it was six months ago.
So why are rates rising? Although its a weak recovery, the economy by most accounts is experiencing a recovery. In addition, the government has lowered the amount of mortgage backed securities it was buying which was keeping rates artifically low.
So what is our advice to people interested in buying a house? It might seem obvious but I would lock in now instead of waiting. Almost all signs point to mortgage rates rising over the next few months. The real question is will the strengthing real estate market be able to withstand higher rates? We will have to wait to find out.