Mortgage trends, Jan 25
The window of opportunity for unbelievably low mortgage rates turned out to be 3 days. Mortgage rates are still very attractive but not the almost unbelievable 5.125% that was quoted as recently as Tuesday.
Here's the story. When the global markets started dropping Monday and Tuesday morning, it was assumed that fears of a recession and reaction to a government stimulus package in the United States was to blame. It now turns out that the positions taken by the rogue trader at the French Bank that lost $7 Billion were being unwound. The Federal Reserve cut interest rates, 10 year treasuries rose sharply meaning long term rates dropped (I know it's confusing but you actually have to talk this way to explain up and down). Expectations were that the Fed would again cut rates at its regularly scheduled meeting next week until the news came out that things aren't so bad after all, the stimulus plan looks better than originally thought and rates have increased a little bit.
Here's where we are. 5.5% is being quoted for a conventional and conforming 30 year fixed which is still very attractive. Jumbos are also going to benefit from the new stimulus plan because the loan limits will be raised allowing Freddie Mac and Fannie Mae to purchase up to $625,000 or $729,750 depending on what is finally worked out. Refinancing activity, recommended here just the other day has been very active according to my mortgage sources. Here's a nice chart courtesy of Calculated Risk.
Since the Charleston real estate market attracts a lot of buyers relocating from some of the more expensive housing markets in the Northeast, the possibility that more buyers will be able to obtain lower rate conforming loans is good news for sellers in those expensive housing markets to be able to sell their homes and move to Charleston (and then be able to purchase a more expensive home here as well that is below the new conforming loan limit).
One additional mortgage trend that I'm hearing about is the rise of the no closing cost loan. Promoted originally by Bank of America and matched by a number of other lenders, while the interest rate is slightly higher, less money being brought to closing. The net result is that it might make sense to pay a little more interest and a little less out of pocket. Ask me for more information.