The financial markets hit some choppy waters this week. With successive drops of 427 and 445 points the Dow ended down substantially for the week.
For some positive news this marks the third week in a row where mortgage rates went down. The wild swings we saw earlier in mortgage rates have for the time being ended. The last 3 weeks saw less movement in all four of the major mortgage products.
30 Year mortgage rates are down to 6.04 dropping from 6.14 last week. All the other main mortgage products saw drops as well. Compared to the 30 year fixed rate the 5 year arm dropped a little more (.11 points from 5.98 to 5.87) and the 15 year dropped a little less (.08 points dropping from 5.81 to 5.73). Below are mortgage rates for the four major products for the last few weeks.
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
October 23, 2008
30-yr 6.04 15-yr 5.72 5-yr ARM 6.06 1-yr ARM 5.23
Moving on lets translate mortgage rates into a the mortgage payments one would pay on a 200k loan. We translated today's rates as well as the rates from 3 weeks ago.
November 20th
30-yr $1204.24
15-yr $1658.67
5-yr ARM $1182.43
1-yr ARM $1109.36
October 30th
30-yr 1258.87
15-yr 1708.31
5-yr ARM 1245.77
1-yr ARM 1120.56
As we can see since October 30th the potential payment on a 30 year, 15 year and 5 year has come down quite a bit. The 1 year arm has remained relatively stable for the last few weeks. The 5 year rate is still probably the most unattractive mortgage product right now. Payments on the 5 year arm are pretty similar to the payments on a 30 year loan. Considering it's hard to know where rates will be in 5 year it's probably not worth to get a 5 year arm considering the small savings it currently offers.
The other thing we are seeing in the mortgage markets is that banks are still very reticent to give out loans. Zero down and no doc loans are pretty much dead. Because of the disappearance of no doc loans it has become harder for people that are self employed to get loans. Since so many potential borrowers have been pushed out of the market potential borrowers with 1031 jobs and money for down payments have very little competition for properties.
So what is going to happen moving forward. It's hard to know what is going to happen with the economy in general. Although mortgage rates have been relatively stable recently if Obama makes any huge initiates in the housing market it could push mortgage rates pretty far in one direction or another. I expect that 30 year mortgage rates will stay above 5.8 until the end of the year simply because I don't expect to see many major policy changes until Obama takes office.
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