Welcome to Charleston Real Estate Blog Sign in | Help

Mortgage rate update, rates are still historically low, 30 yr fixed at 6.375

About a week ago, I pointed out 10 year Treasury Bonds hit a new high for the past 12 months and since mortgage rates closely track the 10 year bond rate, mortgage rates were somewhat higher. That's the bad news, now for the good. While mortgage rates have in fact increased, they are still historically low. I get email updates from several of my preferred lenders and just this morning, Countrywide quoted 6.375% for a 30 yr fixed rate loan with a 1% origination fee or 6.625% for a 30 yr fixed rate loan with a 0% origination fee.

  

The chart on the left represents the year to date performance of the 10 year bond through last week when it peaked. It illustrates a dramatic increase since early May. The chart in the middle is the 3 month chart and the chart on the right shows the high set last Tuesday and how rates have come back down a bit from the high. Charts courtesy of Big Charts and Yahoo! finance.

Despite the above charts, mortgage rates are still very attractive. Continued availability of reasonable mortgage money means that the Charleston real estate market should continue at current trends for the near term, inventory high, unit sales down and prices flat to slightly higher, there should be no dramatic declines or instant recovery to the housing market in Charleston.

Published Monday, June 18, 2007 1:17 PM by Howard Arnoff

Comments

# re: Mortgage rate update, rates are still historically low, 30 yr fixed at 6.375

What happens if interest rates continue up and go thru 7 or 8%...or even higher...?

Monday, June 18, 2007 11:17 PM by js

# re: Mortgage rate update, rates are still historically low, 30 yr fixed at 6.375

JS, as you know, affordability suffers with any increase in mortgage rates and of course housing would be negatively affected. Rates were far too low previously and in part caused some of the large increases in housing prices as investors bailed out of the stock market and put money to work in real estate. Day traders changed hats and became flippers and many got into real estate late like they were late to the stock market.

Higher rates will also affect ARM resets so it would be wise for homeowners to lock in 30 year fixed rate loans which I have been advising for the past year or more. To give you an example, why would someone take a 5 year ARM at 6% instead of a 30 year fixed at 6.375 when the difference in payment is negligible.

Inflation remains the issue and the key to interest rates. The government doesn't really seem to have the ability to understand inflation with the focus core. Core cpi is inflation less inflation. The items that everyone buys everyday, food and energy are going up in price. Items that are occasional purchases are irrelevant. And it is the irrelevant that counts heavily to the index. As long as wages remain controlled, the fed is happy but unfortunately, not the wage earner who is filling up for $50 to $100 and paying 15% more for food.

As to interest rates going to 7 or 8 or higher, they may but then there will be a recession and then interest rates will once again come down. It is called the business cycle for a reason.

Housing prices will come down and then they will go back up. Over the long term, the value of stocks and housing have increased over time. Population growth and job growth will increase demand and resulting in higher prices.

The difference between housing and stocks is that you can't live in a stock certificate and unless you want to live in a cardboard box made out of worthless stock certificates that have been recycled by the paper companies, you have to live somewhere. In many cases, that cost is equal to rent or higher if you count the tax advantages of home ownership. Housing is not just an investment, it is a quality of life.

BTW, why is the stock market so high? It is a predictor of the direction of the economy and it is not predicting doom and gloom.

Tuesday, June 19, 2007 9:55 AM by Howard Arnoff
New Comments to this post are disabled