Rate Check: Relief in ARM's Only
A: A week ago I wrote a post titled, "So Rates Rose & You Didn't Lock In", where I discussed some options for those who missed the boat in mid to late May to lock in their rate. I was hoping for some relief after the huge runup in lending rates over the past 4-5 weeks as the 10YR yield corrected from a trading high of 5.316% on June 13th. Currently, 10YR yields are in a trading range of between 5.08% - 5.19% or so and hovering around the 5.1% mark. So far there has only been rate relief in the adjustable rate loan products.
According to Michael McGivney of Wells Fargo, a direct lender, here are today's rate quotes for three popular loan products:
JUMBO Loan Rates Quoted At...
30YR Fixed - 6.875% (same as last week)
7YR ARM (principal + interest) - 6.25% (down from 6.375% last week)
5YR ARM (principal + interest) - 6.125% (down from 6.25% last week)
*Disclaimer - Rates are subject to change, size of loan, risk adjusters, and a minor banking relationship with Wells Fargo may all affect the final rate quote.
Keep an eye on 10YR yields for where lending rates might be headed next. Use this as a general guide:
MORTGAGE RATES WILL TREND LOWER IF ---> 10YR Yields Drop Below 5% & Holds
MORTGAGE RATES WILL REMAIN UNCHANGED IF ---> 10YR Yields Stay Between 5.05% - 5.15%
MORTGAGE RATES WILL TREND HIGHER IF ---> 10YR Yield Surges Over 5.2% & Holds
The goal here is to educate you on the relationship between the bond market (10YR bond yield) and the mortgage markets. Once you grasp an understanding of this relationship, you should be able to use the bond market as a very short term guide for where lending rates might be headed. Obviously you should focus on this if you are very close to signing a contract or if you are a seller trying to figure out what affects buyer demand. As rates rise affordability goes down and purchasing power is restricted. This is the current environment we are in AFTER rates and the 10YR bond yield made their respective moves higher. We are still waiting to see the full effects of higher borrowing costs on Manhattan property pricing.
Add to Newsvine
Comments (2)
I am waiting to lock in and my broker just indicated a 1/4 tick down in mortgage rates, 30 year fixed. On that news I have decided to lock in, though still at quite a bit higher than I expected when I bid on this apartment in mid may.
Posted by Leo | June 26, 2007 5:49 PM
As a first time homeowner searching around these rates are a big downer and greatly effect my chances to own a home in todays market.
Posted by billie | June 29, 2007 3:27 PM