Crashing the 5% barrier again

Interest rates for traditional home loans crashed the 5% barrier again last week, according to a report from a trade group released today.

And, just like that, demand for mortgages jumped back up, as more homeowners lined up to refinance their loans into a number starting with a "4," the survey by the Mortgage Brokers Assn. found.

The increase was from refinancings, not home buying, the trade group says in its survey. Applications for home loans increased by 8.2% overall from the previous week, but purchase applications fell 1.8% while refi applications surged 14.5%. 

The MBA says the contract rate for 30-year fixed-rate mortgages fell to 4.97% from 5.04% during the week that ended Friday.

Upfront points to lenders, including the origination fee, decreased to 1.01% from 1.25% of the loan amount. The survey assumed that borrowers had good credit and that the loans were for 80% or less of the home's appraised value.

The slight week-to-week drop in mortgage rates has a negligible effect on the cost.  Someone with a $417,000 mortgage -- the limit before you get into "jumbo"-loan territory and rates go higher -- would pay $2,230.91 a month for a 30-year fixed loan at 4.97%, versus $2,248.75 a month at 5.04%.

But when rates go back up again sometime in the future, who wants to brag: "Hey, remember back in 2009 when you could get a loan for less than 5%? I locked mine in at 5.04%!"

-- E. Scott Reckard

 

Comments

[Nelcisco is patient]

I'll brag in 2011 when I puchase a 300k house at 7% or 8% who knows? that was once 600k doing an 80/20 A.R.M. with rates @5% 1st mort. & 8% piggy back 2nd beacuse by then I'll have 20% down.

Earlier I looked at the 10 yr bond rate, it was right about 3.546% as of 1:09pm today, typically we can add 2 to 2.25 points more to a conventional mortgage rate, with the rates currently at about 5% or so it leaves less spread to the bond and one may wander, with the national debt spiriling out of control how sustainable is all of this?

[Laker]

Nelcisco,
I use to think that way too, and i still am in a way.
I'm however confused whether the double dip that we are going to get in...
Not sure how down we will go from here, you can see by looking at price of gold, that there is a push towards inflation.
That is the government is trying to create inflation and the market is trying to make a deflation. Usually, the market wins, and the government loses. However, if you get out of control, maybe, maybe they can inflate our way out of this.
Bottom line, RE prices from 1980's till today are solely a function of interest rates and qualification standards.

[Nelcisco]

I know what you mean Laker, however recent qualification standards is where things got scewed up (too Loose), we are going to need to get back to 80's standards but the number of people who'll qualify won't be enough to see a surge that the market will need to recover. I mentioned last week
FHA is the closest thing to no skin in the game, I really think long term the FHA bubble will bust like subprime did, just my opinion.

[Laker]

FHA charges a fee for the loan. right? something like 1-2%? that is tagged on top of the loan balance.
Also, the interest rate that you get with FHA for same loan compared to traditional 20% down loan is considerably higher.
At one point i could get 4.5% traditional 30 year fixed with 20% down or get FHA loan at 5.125% with 3.5% down.
If you're talking about $500,000 loan, that is couple hundred dollars premium every money! for 30 years!

[Nelcisco]

Brokers still charge 1 to 2 points in origination for conventional as well, maybe bank like the big ones, Wells, Chase don't, I know BofA is a complete train wreck, just ask SFVrealeste. I'm out of the game right now so its hard to say who's doing what.

Interesting though how apps for new puchases fell 1.8% whereas it rose 14.5 for refis, its because FHA streamlines as far as I know don't need appraisals nor is its credit driven, its accually the best loan mod senario out there,but I still stand by my theory that FHA as far as new purchases go won't stand the test of time.