Following the release of the government's plan to buy toxic debt from banks mortgage rates fell to new all time lows. The 30 year rate fell from 4.98 to 4.85 this week. This is .11 points below the previous all time low of 4.96 that was reached on January 15, 2009. Below are the 7 lowest rates on record for the last 40 years.
1) March 2009 4.85
2) January 2009 4.96
3) February 2009 5.07
4) December 2008 5.19
5) June 2003 5.23
6) March 2004 5.45
7) May 2003 5.48
Looking through the rates we can see we saw some low rates in 2003 and 2004. The last 4 months have been the lowest 4 months on record. Also it's worth noting that since the start of March 30 year rates have dropped by .3 points. Below are the mortgage rates for the major mortgage products for the last few weeks.
Mar 26, 2009
30-yr 4.85 15-yr 4.58 5-yr ARM 4.96 1-yr ARM 4.85
Mar 19, 2009
30-yr 4.98 15-yr 4.61 5-yr ARM 4.98 1-yr ARM 4.91
Mar 12, 2009
30-yr 5.03 15-yr 4.64 5-yr ARM 4.99 1-yr ARM 4.80
Mar 05, 2009
30-yr 5.15 15-yr 4.72 5-yr ARM 5.08 1-yr ARM 4.86
Feb 26, 2009
30-yr 5.07 15-yr 4.68 5-yr ARM 5.06 1-yr ARM 4.81
While the 30 year dropped .13 points this week the 15 year mortgage only dropped .03 points. The difference between the 30 year rate and the 15 year rate is the lowest it has been in the last few months making it not that appealing. The 5 and 1 year arm's dropped a little this week as well. But since both of them are at or above the current rate for the 30 year mortgage they are pretty pointless. I have seen them used in a few cases where the 30 year rates is not available (some condo complexes) but their is no reason to consider them if the 30 year product is available.
We also wanted to look at mortgage payments to see the effects of the new lowered rates. We took today's rates and determined the payment on a 200k mortgage. We also looked at rates from last week and rates from October 16, 2008 when 30 year rates were 6.46.
Mar 26
30-yr 1055.38
15-yr 1538.17
5-yr ARM 1068.75
1-yr ARM 1055.38
Mar 19
30-yr 1071.19
15-yr 1541.25
5-yr ARM 1071.19
1-yr ARM 1062.66
Oct 16
30-yr $1258.87
15-yr $1702.87
5-yr ARM $1217.16
1-yr ARM $1093.28
If we compare rates today to rates from a few months ago we can see a substantial difference. For a 200k loan the payment would be $203.49 less per month or a little over 16 percent less.
Ok so what is our advice for people looking for a home or refinancing. First of all I would lock in rates now. I don't necessarily think rates are about to go up next week. But at the same time there is certainly more of a risk rates will go up substantially than rates will go down much more. Quite frankly there is just not that much room to fall.
So what is going to happen over the next few weeks and the next year? I am not sure what is going to happen over the next few weeks. I would guess that rates would hover around their current levels for a little while to come. Over the next year or two I expect rates to go above 10 percent. The government has poured a significant amount of money into the economy and at some point that is going to cause a significant increase in inflation.
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