Friday’s Rates following the Rescue/Bail Out
Rhonda Porter on 10 3, 2008
There have been so many factors that typically influence the direction of mortgage rates over this past week, it’s amazing. Just this morning we had another dismal Jobs Report with a greater loss than expected (for the 9th consecutive month); typically, this would improve mortgage interest rates. However, as Jillayne mentions, there are rumors of the FOMC cutting interest rates; which tends to increase mortgage interest rates (bonds react negatively to inflation). Last but not least, we have the House passing the Rescue Bill…and, after all this drama, rates are for the most part, unchanged from this morning and last week (comparing Friday to Friday).
Conforming Mortgage Rates (loan amounts up to $417,000 for 1-unit properties). The conforming rate quote below is based on owner occupied with a mid-low credit score of 720-739, “full doc” purchase with a sales price of $500,000 and a loan amount of $400,000. This scenario includes reserves (taxes & insurance) not being waived. Rates quoted are priced based on a 45 day lock with no prepayment penalties on any of the rates quoted below.
30 Year Fixed @ 1 Pt: 5.875% (APR 6.029%) unchanged
30 Year Fixed with 10 Year Interest Only @ 1 Pt: 6.375% (APR 6.520%) unchanged
15 Year Fixed @ 1 Pt: 5.500% (APR 5.753%) unchanged
5/1 ARM – LIBOR @ 1 Pt: 5.875% (APR 7.135%) 
0.125% to rate
Conforming-Jumbo Rates. Pricing is based on the same criteria above except where the loan amount is $417,001 – $567,500 for properties in King, Snohomish or Pierce Counties; specifically priced for a sales price of $650,000 and a $520,000 loan amount.
30 Year Fixed @ 1 Pt: 6.000% (APR 6.148%) unchanged
30 Year Fixed with 10 Year Interest Only @ 1 Pt: 7.375% (APR 7.529%) unchanged
5/1 LIBOR @ 1 Pt: 6.500% (APR 7.142%) 0.375% to rate
FHA. Pricing based on credit score of 620 or better and loan amounts up to $362,790 for FHA in King, Snohomish and Pierce Counties.
30 Year Fixed @ 1 Pt: 6.250% (APR 6.933%) unchanged
FHA-Jumbo. Pricing based on loan amounts from $362,791 – $567,500 for King, Snohomish and Pierce Counties.
30 Year Fixed @ 1 Pt: 6.625% (APR 7.312%) 0.25% to rate
VA. Pricing based on credit scores of 620 or better based on loan amounts up to $417,000. VA loan amounts over $417,000 are also available. Contact your local Mortgage Professional for more information.
30 Year Fixed @ 1 Pt: 6.375% (APR 6.497%) unchanged
Prime Rate (what HELOCs are based on): 5.000%
This is just a small sample available of rates and products. Rates are as of Friday, October 3, 2008 at 1:45 p.m. and may change at any time. Available programs may change at anytime as well. This is not a guarantee nor is it a commitment of interest rate. To see live rate quotes, you can follow me on Twitter.
About the Author: Rhonda Porter
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17 Responses to “Friday’s Rates following the Rescue/Bail Out”
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Maybe this is a dumb question, but isn’t the 5/1 ARM rate the initial rate of the loan, which could go up after 5 years? If so, why would anyone get an ARM with an initial rate equal to or higher than the fixed rate?
cautious buyer, nobody would get a 5/1 ARM right now.
The main purpose of my posting the rates every Friday is to show the difference week to week. I could leave the ARMs off the rates but what this is showing other information, such as an inverted yield curve (when long term rates are better than short term).
Fascinating. Most of the linked article seems to say the inverted curve is indicative of rates getting lower in the long term, but at the end it simply states that fixed rates will get higher. I don’t get it.
Thanks
When there is no spread between the 5/1 arm and the 30 year fixed, it’s like saying “don’t bother”. The product becomes a non-option. I wish the FHA rate were equal to the conventional rate. Any hope that will happen, Rhonda? Is the FHA rate always higher than the conventional rate? In this market a lower FHA rate could help things.
cautious buyer, I did search pretty quickly for that article…you can google “inverted yield curve” and find many other opinions on what it may be a sign of (if anything).
LIBOR, which these ARMs are priced on, is high right now.
Ardell, who knows…historically, FHA rate (comparing 30 year fixed) has been slightly higher than conventional. One thing to keep in mind is that typically with FHA, the loan to value may be higher than conventional. If you were to compare a 95% conventional to an FHA loan, the FHA loan may actually have a more favorable payment.
A FHA loan may have also more odds of loan approval at that LTV. We recently had a 95% conventional loan with 700 credit receive an “expanded approval”…which means a much higher rate. This buyer is now a FHA candidate.
Thanks for your help. Most sources I see say it means low inflation in the future, high correlation with upcoming recession. I didn’t realize that ARMs were priced on the interbank rate. It makes sense that those would be higher right now.
I thought that FHA loans had higher rates because they folded the mortgage insurance into the rates somehow.
cautious buyer, a majority of ARMS are based on LIBOR (usually 1 year) plus a margin (this is important to determine before locking in–not that you’d select an ARM today!). LIBOR is currently 4.058 (for the 1 yr LIBOR). People with ARMs adjusting now (or in the next year) should really contact their mortgage professional ASAP to review what their rate (index-such as LIBOR + margin = new rate: subject to rate caps).
The ARM rates are most likely higher because of LIBOR rates.
FHA does not fold the mortgage insurance into the rate. The upfront mortgage insurance is usually financed into the loan and monthly mortgage insurance is added to the payment.
I want to be more clear about the inverted yield curve. This is when the 2 year note yield is higher than the 10 year note yield….which is not the case (at this time).
Everything is so whacky with predicting rates in this market–not much would surprise me anymore!
So someone with a credit score of 660 might get a better rate with FHA even though it appears to be higher…is that correct? Conventional rates go up as ratios stretch or credit scores diminish, but FHA rate stays constant?
Ardell:
Yes.
Here’s a fairly concrete example.
95% financing, MI is going to be .78 (usually), while FHA will still be .5.
Another, less concrete example.
For a loan recently, I got an approve eligible in FHA, but a expanded approval, level 4 in conventional making the conventional at least 1% higher in rate.
And finally, thanks to HR 3221, FHA has lifted risk based pricing (temporarily), so those with lower credit scores may have better rates with FHA than conventional.
So noted on FHA, good information.
I know the adjusted rate on an ARM is based on LIBOR, but does LIBOR have a correlation with the initial rate as well?
How high does LTV need to be before FHA starts to make sense, given say a 750 credit score? Might FHA still be better with 10 or 15% down?
cautious buyer,
with a 750 low mid credit score (if there is more than one borrower, the lowest middle score of the two are used) I would HOPE you could use conventioanl financing with 10 or 15% down. Both FHA and conventional will require 2 years employment history and some assets (beyond down payment).
I do recommend working with mortgage professionals who are FHA approved just in case the conventional approval is not attractive (higher rate due to expanded approval) as I mentioned in comment 6. We were floored by the response from the AUS (automated underwriting ie computer program).
“And finally, thanks to HR 3221, FHA has lifted risk based pricing (temporarily), so those with lower credit scores may have better rates with FHA than conventional.”
This is really important for a lot of people. Is there an identifed end date or is it “until further notice”? When did that first become effective?
Ardell, I’ll write a post covering all of this… I need to update one that I have here at RCG regarding FHA and mortgage insurance. So much has changed that it’s a real challenge to keep things current!
Off the top of my head, I want to say it’s until September 30, 2009 (but I need to verify).
Ardell/Rhonda: confirmed. Sept 30, 2009. They put a one year moratorium on risk-based pricing for FHA loans.
Thanks Jillayne. I knew that date was engraved in my brain for some reason!
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