Will mortgage rates rise, fall, or stabilize in the near future? Fixed vs ARM?
by Mortgage Rates on Monday, November 22nd, 2010 | 4 Comments
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they have been rising— lock in on a fixed rate it is not wise to buy the rate down as at some point they may fall and refinancing is an option at that time
I ama mortgage banker in TN & KY
Get a fixed rate, and lock it today. Why?
Rates are going up, and Bernanke just issued a directive for mortgage lenders (FNMA/FHLMC) to VERIFY that you can afford the new payment after it adjusts. This will COMPLICATE your approval process… and it is hard enough to close loans today.
Also, focusing on RATE is a waste if you will not be in the house over 5 years. You pay your mortgage with $ NOT RATE. The difference in PAYMENT between an ARM and Fixed is low enough to (usually) make it a WASTE of $ to buy down points. Keep your cash, make a slightly higher payment.
Best of luck!
Interest rates are going to go up, but not before the election.
One of the major reasons our exchange rate is doing so poorly and oil is so high is a result of our low interest rates right now ( Federal Funds Rate ). The Fed has kept rates low to encourage spending and investing by consumers and businesses. If they raise them it cost more to do business, investment slows down and it costs more for foreigners to buy our products. Exports slow down, and people lose jobs.
But the FED will not make changes before November for political reasons. But they are going up for sure. Foreigners are the ones that buy our debt – Bonds – that finance our spending. They buy our debt because our economy and our nation is secure. But if you can buy a bond stateside for 3 percent and get one in Europe for 5 or 6 percent ….where are you going to put your money ?
The main reason that we are in the housing crunch that we are in right now – in my opinion – is the ARM’s that were sold 3,4,5 years ago. They were giving ARM’s for 3 percent and readjusting after 3 years or so. Rates have risen in the last few years but not significantly. Higher interest rates and mortgage during the renegotation period have caught people by suprise. We have all heard stories about people losing their homes and having them repossesed…how many are ARM’s and how many are fixed rate ? We do not know what the future holds and you do not want to be in that same position 5 years from now.
Historically, 30 year fixed rate mortgages have been about 8 percent and they are 6.5 in my area. At least that is what they are advertising. Qualification standards have risen, but as long as you have a good credit history and are not overextending yourself it should not be a problem. It is bascially affecting the ones that have spotty credit histories.
6.2 percent is excellent for 30 years.
I would take the fixed rate mortgage now, even if it costs more per month. As long as you can handle the first year or so, the mortgage gets easier to pay and a smaller percentage of your paycheck. You will also get a nice refund check based on the interest etc…
Do not forget that if you renegotiate in 3,4, 5 years, you still have to pay closing costs again and get another estimation etc. You should figure that into the cost of the savings (?) you would make on the ARM. If closing costs cost you 3k, and you renegotiate in 5 years….add fifty dollars to the cost of the ARM.
Saving one point on interest is penny wise and pound foolish in my opinion. Do the math both ways …how much will both of them cost ? I bet the fixed rate does not cost significantly more per month.
Take the Fixed rate mortgage if you can afford it. The peace of mind and security is well worth it.