Mortgage Rates Drop Again to Near Record Lows

Last week 30 year rates were at 5.53. At that point those were the 5th lowest rates we have seen in the last 30 years. This week we saw rates drop again to 5.47. Now rates are third lowest we have seen in the last 30 years. Below are the dates and mortgage rates. Below are the four lowest rates and their dates.

1) June 2003 5.23
2) March 2004 5.45
3) December 2008 5.47
4) May 2003 5.48

So most of the other low rates were during 2003 and 2004, which were historic lows. One difference between now and then is that the current rates are only available to owner occupy single family borrowers. Banks are not interested in loaning money to investors. I talked to a loan officer this morning. The rate for an owner occupy single family loan was 5.125. On the other hand the rate for an investor (non owner occupy) single family loan was 6.5. Basically while banks are offering historically low rates to individuals they don't want to deal with investors. This is because most of the current foreclosures are with investors who own multiple properties. Below are mortgage rates for the last few weeks. These are all for single family owner occupy loans.

December 11, 2008
30-yr 5.47 15-yr 5.20 5-yr ARM 5.82 1-yr ARM 5.09

December 4, 2008
30-yr 5.53 15-yr 5.33 5-yr ARM 5.77 1-yr ARM 5.02

November 26, 2008
30-yr 5.97 15-yr 5.74 5-yr ARM 5.86 1-yr ARM 5.18

November 20, 2008
30-yr 6.04 15-yr 5.73 5-yr ARM 5.87 1-yr ARM 5.29

November 13, 2008
30-yr 6.14 15-yr 5.81 5-yr ARM 5.98 1-yr ARM 5.33

November 6, 2008
30-yr 6.20 15-yr 5.88 5-yr ARM 6.19 1-yr ARM 5.25

October 30, 2008
30-yr 6.46 15-yr 6.19 5-yr ARM 6.36 1-yr ARM 5.38

For 30 Year rates since October 30th rates have come down almost a full point. With 5 Year mortgage rates above 30 year rates they continue to be basically pointless. With 15 years only slightly below 30 year rates at this time it probably makes sense to get a 30 year rate and overpay. In addition, with 1 year rates only half a point below 30 year rates, at this point in time 30 year rates are pretty much king. In addition to mortgage rates it's always interesting to look at what an actual mortgage payment would be. We used our mortgage calculator to translate today's rates into a mortgage payment on a 200k loan. We also did the same thing using rates from last week and the rates on October 30th.

December 11th
30-yr $1131.81
15-yr $1602.50
5-yr ARM $1176.05
1-yr ARM $1084.67

December 4th
30-yr $1139.34
15-yr $1616.18
5-yr ARM $1169.68
1-yr ARM $1076.08

October 30th
30-yr $1258.87
15-yr $1708.31
5-yr ARM $1245.77
1-yr ARM $1120.56

Looking at 30 year rates compared to October 30th a mortgage payment on a 200k loan has come down $127.06 a month or 10.1 percent. Again looking back to October 30th a mortgage payment using a 15 year mortgage has come down 6.2 percent, a payment using a 5 year arm has come down 5.6% and a mortgage using a 1 year loan has come down 3.2%.

So what is my advice? Unfortunately most investors are not going to get a benefit from refinancing. It's very difficult for investors to get loans and if they do they will receive pretty high rates. On the other hand the prospect for individuals is pretty positive. Rates are currently at all time lows. There is a possibility of the government passing a bill that will create 4.5 rates. From what I have heard this is not going to affect people looking to refinance. For people that are buying it's a little bit hard to decide if they should wait for the 4.5 rate. On the one hand I think if 4.5 interest loans are available we will surge a surge in real estate activity. This basically means it will be harder to get a good deal because their will be more buyers to compete with. On the other hand getting a home 4.5 percent interest rate has obvious benefits as far as lower payments.

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