Rochester MN Real Estate Market Blog » Interest Rate News

Looking for a Silver Lining – Mortgage Interest Rates Continue to Drop

admin — Tue, 16 Aug 2011 11:57:05 +0000

Last week was a tough one in the financial markets following the debt rating downgrades. Nevertheless, the resulting decline in mortgage rates could mean significant savings for home buyers. The interest rate on a 30-year mortgage fell to 4.32% last week, down from 4.39% a week earlier, according to Freddie Mac’s Primary Mortgage Market Survey. The record low for a 30-year mortgage was 4.17% set last November.

Last week saw record-setting lows on 15-year fixed mortgages for the second week in a row, falling to 3.5%. Not surprisingly, refinancing activity has picked up in light of the lowered interest rates. On a $200,000, 30-year loan a borrower would save more than $29,000 on a 4.32% loan during the loan period compared to a 5% fixed mortgage.

At this writing rates have continued to fall, so be sure to check with your mortgage lender for the most current information and for assistance in deciding what is best for your personal situation.

If you have any questions, please don’t hesitate to contact me. As always, I am working to make your home buying and selling a rewarding experience.

Shawn Buryska, ABR, CRS, GRI
Coldwell Banker Burnet Realty

www.ShawnBuryska.com
507-252-6745 – Direct
507-254-7425 – Mobile
507-252-6845 – Fax

Shawn Buryska, Coldwell Banker Burnet Realty, Licensed in the state of Minnesota

Record Low Interest Rates Can Mean Large Long Term Savings

admin — Fri, 08 Oct 2010 20:52:11 +0000

Interest rates continue to hit lows not seen in 40 years. With interest rates just above 4%, the savings over the course of a 30 year fixed mortgage are remarkable. Combined with high levels of housing inventory for sale and a downward pressure on home prices, for the well-qualified home buyer, this can be a great time to buy.

Interest rates on a 30 year fixed rate mortgage are currently at an APR of 4.2%. The monthly payment* on a $200,000 mortgage at 4.2% would be $978. A year ago the average interest rate was 5.25%, which would result in a $1104 monthly payment on a $200,000 mortgage, a difference of $126 per month or $1512 per year. In the third quarter of 2008 the average interest rate was 6.25%, a difference of $253 per month or $3036 per year on a $200,000 mortgage. A year earlier, at 6.5%, a homeowner would have expected to pay $1264 per month in principle and interest, $286 more than this year and $3432 over the course of a year.

Over the life of a 30 year mortgage of $200,000 at 4.2%, with no adjustments or refinancing, a homeowner could expect to spend $45,360 less than if they had purchased a year ago, $91,080 compared to two years ago, and more than $100,000 compared to three years ago.

The upside of the current economic climate is the overall lower price that home buyers can expect to pay when they qualify for the historically lower interest rates. See my website for mortgage calculators to approximate mortgage payments for more specific loan amounts and to compare payments on 15 year and 30 year loans.

If you’re considering buying a home, be sure to consult with a Real Estate professional and a Mortgage professional to determine the best price range and mortgage product for your specific situation.

* This article is comparing the impact of interest rate on principle and interest payments. These examples are approximate and do not include taxes and insurance.

Lower Interest Rates Can Mean Large Long Term Savings

admin — Thu, 23 Sep 2010 17:49:39 +0000

During the last several months we’ve seen record low interest rates. With interest rates remaining below 5%, the savings over the course of a 30 year fixed mortgage are remarkable. Combined with high levels of housing inventory for sale and a downward pressure on home prices, for the well-qualified home buyer, this can be a great time to buy.

Interest rates on a 30 year fixed rate mortgage are currently close to 4.375%. The monthly payment* on a $200,000 mortgage at 4.375% would be $998. A year ago the average interest rate was 5.25%, which would result in a $1104 monthly payment on a $200,000 mortgage, a difference of $106 per month or $1272 per year. In the third quarter of 2008 the average interest rate was 6.25%, a difference of $233 per month or $2796 per year on a $200,000 mortgage. A year earlier, at 6.5%, a homeowner would have expected to pay $1264 per month in principle and interest, $266 more than this year and $3192 over the course of a year.

Over the life of a 30 year mortgage of $200,000 at 4.375%, with no adjustments or refinancing, a homeowner could expect to spend $38,000 less than if they had purchased a year ago, $83,800 compared to two years ago, and more than $95,000 compared to three years ago.

* This article is comparing the impact of interest rate on principle and interest payments. These examples are approximate and do not include taxes and insurance.

Interest rates are great now but…

admin — Thu, 08 Jan 2009 01:58:01 +0000

We currently at record low interest rates which is great for the current real estate market but how long can we expect to see them at these levels. Larry Baer with Market Alert has written a great commentary regarding this subject.

Commentary By Larry Baer:

Thank-you Mr. Bernanke – your plan is working like a charm so far.

In the past two trading sessions, the yield on the 30-year Treasury bond has jumped by more than 30 basis points, the biggest two-day rise in more than 15-years. Expectations that inflation will soar from a coming massive spike in government borrowing has led traders the world over to dump Treasuries. Normally, soaring Treasury yields would drag mortgage interest rates higher as well. But not this time.

Fortunately for all of us in the mortgage industry Fed Chairman Bernanke and his fellow central bankers moved proactively in November to put a $500 billion buffer between rate sheets and the stresses in other areas of the credit market. While the Treasury market has been crushed with sell orders – the Fed has been busy aggressively buying mortgage-backed securities to support steady to lower mortgage interest rates. As long as the money holds out — this will be a sweet, sweet deal for mortgage lenders and borrowers alike.

I have no intention of raining on anybody’s parade but I think it is worth at least noting that at the current pace mortgage-backed securities will soon be approaching yield levels that only a Fed Chairman could love. Once Mr. Bernanke and his band of merry central bankers exhaust their available capital – no one else (in terms of other investors) will be at home to pick-up the slack and mortgage interest rates will rise. That is certainly not going to happen today, this week or even this month probably – but somewhere toward the end of the year (in my opinion) mortgage interest rates will likely begin to move notably higher from current levels as they are finally allowed to seek their natural level.

The central feature on this week’s economic calendar will be Friday’s December nonfarm payroll report. The market has already priced in the expected loss of 485,000 jobs together with the likelihood the national jobless rate ratcheted up to 6.9% from last month’s 6.7% level. Chances are the actual numbers will match or fall within shouting distance of the consensus estimate values. If so, the report’s impact on the trend trajectory of mortgage interest rates will not be large, if it registers at all. In the off-chance the headline December payroll shows a job loss of 470,000 or less and/or the national jobless rates posts a reading of 6.7% or less look for mortgage interest rates to edge fractionally higher.

Rates Higher as Stocks Climb

admin — Sun, 20 Jul 2008 01:38:25 +0000

Last week, the stock market declined and mortgage rates fell, as investors worried about Fannie Mae and Freddie Mac and oil prices reached record highs. In a pivotal reversal, the opposite took place this week. With increased confidence in the financial sector and lower oil prices, the Dow gained over 400 points. As investors returned to stock assets, they sold relatively safer investments such as bonds, which pushed mortgage rates higher.

While Fannie and Freddie dominated most of the headlines this week, Fed Chief Bernanke presented the latest Fed forecast for the economy during his testimony before Congress. The Fed lowered its projections for economic growth for 2008 and 2009 and expressed concern about the risk of higher inflation. Bernanke described the inflation outlook as “unusually uncertain”. From Bernanke’s comments, investors concluded that the Fed’s primary goal right now is to promote stability in financial markets, rather than fighting inflation, and they expect the Fed to hold rates steady in the near-term.

The news in the housing sector was mixed. June Housing Starts rose 9%, far above the consensus. Similarly, June Building Permits, a leading indicator of future housing market activity, rose 12%, which also far exceeded the forecasts. However, a change in the New York City building codes contributed much of the gains. Separately, the National Association of Home Builders (NAHB) sentiment index fell to a record low in July.

The Second Mortgage Industry continues to restrict as well primarily caused by concerns in the banking arena. Many banks announced this week further conservative guidelines or have made the decision to exit this business as further stock pressures arose.

Fed Leaves Interest Rates Unchanged

admin — Thu, 26 Jun 2008 01:35:39 +0000

As expected, the members of the Federal Open Market Committee voted to hold their key fed fund rate unchanged. Today’s decision is the first time the Fed has held short-term interest rates steady since they embarked on a series of rate cuts that dates back to last September.

In their much anticipated post-meeting policy statement, policymakers signaled that while the economy still faces some rather stiff headwinds, the chance of a severe economic slowdown or outright recession has diminished. The Committee went on to say, “In light of the continued increase in the prices of energy and some other commodities and the elevated state of some indicators of inflation and the elevated state of inflation expectations, uncertainty about the inflation outlook remains high.”

The initial sell off in the mortgage market was created by that last sentence. All many mortgage investors heard was the “. uncertainty about the inflation outlook remains high” phrase. After the initial knee-jerk sell off in the mortgage market calmer, cooler heads have since entered the market – realizing that the Fed stopped well short of suggesting an imminent acceleration of inflation pressures is likely – which by extension also means attendant short-term interest rate hikes are not likely to develop any time soon either

I look for mortgage investors to remain very cautious with their pricing – at least until he Treasury’s auction of $20 billion in 5-year notes ends tomorrow afternoon at 1:00 p.m. ET. Once the auction is over – I think the potential for upside investor price gains will improve notably.

Fed Cuts Interest Rates

admin — Fri, 02 May 2008 01:18:28 +0000

The Federal Reserve has cut interest rates by one-quarter of a percentage point yesterday, in what many economists are predicting might be the last such cut by the Federal Reserve for a while. It is the seventh cut since late August, and it comes as the Fed is trying to balance between fears of impending recession and signs of inflation. The Federal Reserve Funds are now at 2.00%, which means most banks will now be lowering their Prime Rate to around 5.00%

What does this mean for home buyers, home sellers and homes for sale in Rochester Minnesota? Any time the Fed cuts rates it’s viewed as a positive move by the general public. In actually however the Fed interest rates are not directly tied to mortgage rates. Mortgage rates are tied to the 10 year treasury bill and influenced more by bond prices. When the fed cuts their rate, it’s good news for the consumer as any consumer debt like car loans, and home equity lines of credit will usually adjust accordingly. Bottom line it does make buying or selling a house a little easier as the home buyer has a little extra free cash to spend if they are not spending as much on other consumer debt.

Rates Down Slightly For the Week

admin — Sat, 12 Apr 2008 01:15:56 +0000

We didn’t see the broad swings in interest rates this week as were experience in weeks past. With little new economic news for the week rates settled in for a slightly lower average then last week.

Ecnomic news was mixed for the week. The Fed is forecasting that with the recent rate cuts and the government stimulus packages will lead to faster economic growth for the remainder of the year. On the other side of the fence, the Pending Home Sales index fell more then expected in January and the index was down marginally from a year ago. Pending Home Sales is the leading indicators for the future direction of the housing market and NAR (National Association of REALTORS) is predicting flat home sales for the next several months.

Mortgage Meltdown Maps

admin — Sat, 05 Apr 2008 01:14:36 +0000

WASHINGTON, D.C.

• Federal Reserve maps show key areas of concern

• What color is your state?

• Scroll down to the bottom for the website link

The Federal Reserve System now has a set of dynamic maps and data online that illustrate sub prime and alt-A mortgage loan conditions across the United States. The maps display regional variation in the condition of securitized, owner-occupied sub prime, and alt-A mortgage loans. The more intense the color, the bigger the problem or potential problem. Monthly updates are planned. The maps and data can be used to assist in the identification of existing and potential foreclosure hotspots, the Fed says. (Click on the link below to see the maps. Be advised that the site loads slowly, apparently affected by demand.)

The maps show the following information for sub prime and alt-A loans for each state and most of the counties and zip codes in the United States:

• Loans per 1,000 housing units

• Loans in foreclosure per 1,000 housing units

• Loans real estate owned (REO) per 1,000 housing units

• Share of loans that are adjustable rate mortgages (ARMs)

• Share of loans for which payments are current

• Share of loans that are 90-plus days delinquent

• Share of loans in foreclosure

• Median combined loan-to-value ratio (LTV) at origination

• Share of loans with low credit score (FICO) and high LTV at origination

• Share of loans with low- or no documentation

• Share of ARMs with initial reset in the next 12 months

• Share of loans with a late payment in the past 12 months

The maps are maintained by the Federal Reserve Bank of New York.

To access the data visit: http://www2.newyorkfed.org/mortgagemaps/

Mortgage Rates Higher

admin — Sat, 29 Mar 2008 01:13:14 +0000

After two weeks of nice declines, mortgage rates rose during the week, back to the levels seen at the end of February. March was an extremely volatile month, with large daily swings a common occurrence. Investors bought mortgage backed securities during periods of increased concern about the stability of the credit markets. Just as quickly, they sold mortgage backed securities when the fears eased. Last week, investors generally felt that the Fed’s rate cuts and other actions were sufficient to combat the difficulties in credit markets, demand for mortgage investments fell, and mortgage rates rose. Mortgage rates were also hurt last week by a series of Fed officials who talked tough about inflation. Higher inflation is bad news for mortgage markets, as investors require a higher yield to offset the inflation. With all the attention on inflation, Friday’s release of the Fed’s preferred inflation indicator was highly anticipated. The February Core PCE price index rose at a 2.0% annual rate, as expected, which was at the upper boundary of the Fed’s perceived comfort zone. In the housing sector, the news was somewhat encouraging. February Existing Home Sales came in stronger than expected. The inventory of unsold homes declined modestly, while median prices fell. Sales activity has held in a narrow range since September, and the chief economist of the National Association of Realtors (NAR) suggested that the data was “another sign that the market is stabilizing”. February New Home Sales also came in a little higher than the consensus. Separately, the government’s OFHEO housing index showed that January prices were down 3% from one year earlier.