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Are Mortgage Rates Going to Go Lower ? (than they are today).


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11 replies to this topic

#1 of 12 OFFLINE   Brian Serene

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Posted March 18 2008 - 06:48 AM

I have a 6.5% fixed 15 year mortgage. I can refinance at 5.175% with a 15 year fixed rate mortgage with no points. I have until 9:30 AM tomorrow to lock in the 5.175% rate.

Do you think that mortgage rates will go down any further before May 28th?

Thanks In Advance

#2 of 12 OFFLINE   Bejoy

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Posted March 18 2008 - 08:34 AM

Everybody was expecting one point cut today, but got only three quarters. There's definitely going to be more cuts and some even predicts Japan style ZIRP( zero-interest-rate policy) in future.

This may not translate to mortgage interests as low as couple years back(think sub prime), but it will go definitely lower than what you are talking about. It is a 'necessity' for feds to have the mortgage interest rate to go down.

JMHO

#3 of 12 OFFLINE   Matt Stryker

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Posted March 18 2008 - 08:53 AM

just my $0.02 - while I know the Fed wants lower mortgage rates and increase spending, at some point their rate cuts are going to most likely cause inflation or at least a big fear of inflation - at which case the rates will rebound.

#4 of 12 OFFLINE   Bryan X

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Posted March 18 2008 - 08:58 AM

Quote:
Everybody was expecting one point cut today, but got only three quarters.

Quote:
It is a 'necessity' for feds to have the mortgage interest rate to go down.

The Federal Reserve doesn't cut mortgage interest rates-- nor do they even directly influence them.

Today's cut by the Fed will not necessarily translate into lower rates. The Feds cut the discount rate-- what it charges banks to borrow directly from the Fed. The Feds also lowered their federal funds rate target to 2.25% which is a short-term rate that banks charge each other for overnight loans.

These rates have nothing to do with long-term mortgage rates.

Long-term mortgage rates are mostly tied to the 10-year Treasury yield. That is determined by bond traders, worldwide. Meaning mortgage rates are determined more by how fearful the market is of inflation. Right now that's a pretty big fear.

So don't be surprised to see rates rise as they have been lately -- even though the Feds have been cutting short-term rates.

Watch the 10-year Treasury yield if you want to see what long-term mortgage rates will do. Long-Term mortgage rates are typically about 2 percentage points higher than the yield on the 10-year Treasury, which currently is about 3.29%. However, lenders are so skittish about lending money right now due to the turmoil in the housing market that long-term rates are more than the typcial 2 percentage points above the 10-year Treasury yield.

#5 of 12 OFFLINE   Eric_L

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Posted March 18 2008 - 09:57 AM

You also should consider the closing costs, compare to the time you will spend in the home and the time value of money.... It can be complicated. Generally a 2pt decrease in rate pays off your closing costs in 4-7 years... Yes - it takes that long to break even.

#6 of 12 OFFLINE   Bejoy

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Posted March 19 2008 - 03:28 AM

Bryan,

Never said the feds cut mortgage rates.........

Normally, when the Federal Reserve cuts the rate at which it lends money to U.S. banks, those banks in turn cut the rates at which they lend money for personal and commercial use.

To the OP:
A Fed rate cut could send some mortgage rates even higher: Financial News - Yahoo! Finance

#7 of 12 OFFLINE   nolesrule

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Posted March 19 2008 - 04:43 AM

Quote:
Originally Posted by Eric_L
You also should consider the closing costs, compare to the time you will spend in the home and the time value of money.... It can be complicated. Generally a 2pt decrease in rate pays off your closing costs in 4-7 years... Yes - it takes that long to break even.

This is a very important point, and one of the most important points to consider when refinancing.

#8 of 12 OFFLINE   Bryan X

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Posted March 19 2008 - 08:58 AM

Quote:
Never said the feds cut mortgage rates.........

Misinterpreted your post where you said "It is a 'necessity' for feds to have the mortgage interest rate to go down." Since the Feds don't control mortgage rates, that threw me off. My bad.

Quote:
Normally, when the Federal Reserve cuts the rate at which it lends money to U.S. banks, those banks in turn cut the rates at which they lend money for personal and commercial use.

Yeah, they cut the rates on short-term personal and commercial loans. Not necessarily long-term rates. Those follow the 10-year treasury yield. So yes, banks will probably cut some rates, but more than likely it will be on ARMs and other short-term loans, not 15 year fixed-rates the OP was asking about.

#9 of 12 OFFLINE   SethH

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Posted March 19 2008 - 03:38 PM

Generally a 2pt decrease in rate pays off your closing costs in 4-7 years... Yes - it takes that long to break even.


Those would be some pretty serious closing costs! If you take an example of a $150k mortgage over 15 years and use 7% and 5%, the monthly payment would be reduced by $162. So you would save >$1900 in the first year. If you use the same numbers with a 30 year mortgage the change is even more drastic since a larger portion of your payment is interest. ($192/mo vs $162/mo)

#10 of 12 OFFLINE   mylan

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Posted March 28 2008 - 03:04 AM

Does anyone have any experience with online mortgage companies like Lending Tree or Quicken? We were thinking of going with our present bank, SunTrust, but have also considered these.
I know enough to know I don't know enough!

#11 of 12 OFFLINE   Scott Merryfield

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Posted March 28 2008 - 05:03 AM

I have not used Quicken Loans directly online, but have gone through Rock Financial locally. They are a "Quicken Loan Company" and all documents are processed as Quicken Loans. They have been the best mortgage company I've ever worked with. We've used them for two refinancings and one condo purchase, and all three closings went smoothly. I've had some bad experiences with other mortgage companies and brokers, so I do not hand out praise casually.

#12 of 12 OFFLINE   Brandon_T

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Posted March 28 2008 - 03:38 PM

Scott, who did you deal with from Rock? I have a friend that works in your area for them. His name is Chris and we are thinking of going to him for a new loan soon.


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