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2011-05-20 09:25:30
Interest Rates down for 5th straight week and incr

Interest rates are down for a 5th straight week!! This is amazing news considering rates were as high as 5% on a 30 year fixed FHA loan 5 weeks ago. Now, they have dropped to around 4.25%, give or take 1/8%. 


Here is the graph and explanation from MortgageMatch.com:


Mortgage Interest rate Trends May 2011


According to the newest Freddie Mac Primary Mortgage Market Survey, long-term, fixed-rate mortgages edged down for the fifth straight week to 4.61 percent—a new record low—as financial markets received mixed indicators.

“Fixed mortgage rates inched down for the fifth consecutive week as financial markets try to ascertain the current strength of the economy. Industrial production was unchanged in April owing to disruptions in automobile parts supplies due to the earthquake and tsunami in Japan.
Netting out automobiles and gasoline, retail sales rose 0.2 percent in April, which was less than a third of the increase in March and the weakest growth since December 2010. However, consumer confidence, as measured by the University of Michigan, rose above the market consensus in May to the highest reading since February.” Freddie Chief Economist Frank Nothaft said.

The average rate for 30-year fixed-rate mortgages (FRMs) dropped to 4.61 percent from the previous week, when it was 4.63 percent.

This week 15-year fixed rates averaged 3.80 percent, down from last week when it averaged 3.82 percent. A year ago at this time, the 15-year FRM averaged 4.24 percent.

For 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs), this week averaged 3.48 percent this week, up from last week when it averaged 3.41 percent. A year ago, the 5-year ARM averaged 3.91 percent.

In addition, 1-year Treasury-indexed ARMs averaged 3.15 percent this week, up from last week when it averaged 3.11 percent. At this time last year, the 1-year ARM averaged 4.00 percent.

To obtain the rates, the 30-year and 15-year fixed-rate mortgages required the payment of an average 0.7points in fees, while the 5-year and 1-year ARMs required 0.6 point.

 

As I have explained before, the determination of a 'great deal' on a home purchase, for those taking out a mortgage, is equally determined by both purchase price AND interest rate. 


For every percentage point (1%) on a mortgage, monthly payments increase $83/month for every hundred thousand dollars that you borrow. So the difference between a 4.25% and a 5.25% interest rate on a $200,000 loan is an additional $167/month, or $2000/year, JUST IN INTEREST!!


The additional $167/month is the same as purchasing a home that is about $25,000 more expensive at current interest rates. In other words, mortgage payments would be about the same for a $225,000 mortgage at 4.25% interest as a $200,000 mortgage at 5.25% interest. 


Here is a graph which shows how much (approximately) interest rates affect monthly mortgage payments:

 

Loan Amount

Payment at 4.25% interest (2010-2011)

Payment at 5% interest (2009)

Payment at 6.25% interest (2002-2008)

Payment at 8% interest (92-02)

$100,000

$605

$650

$730

$850

$120,000

$730

$780

$875

$1,015

$150,000

$900

$975

$1,090

$1,265

$200,000

$1,200

$1,300

$1,450

$1,680

$300,000

$1800

$1950

$2,180

$2,530



If you are ready and able to purchase a home, it is highly recommended that you consider moving forward as quickly as you can. Let me know what I can do to be of assistance.

 
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