January 26th, 2011 12:38 PM by Narbik Karamian
Here is my mortgage news updat from December 8/2010
If you are interested in receiving my mortgage industry bulletins please email me at narbik@benegroupinc.com
Greetings,
Here is an interesting twist on interest rates:
Interest rates today shot up another .25% from yesterday. The 30 year conforming loans (up to $417,000) hit 4.75% from 4.5% yesterday. The high balance conforming loans (between $417,000 & $729,750) hit 5% today from 4.75% yesterday. This is a significant increase in one day. This is a new record for high balance loans exceeding the 5% mark. We have not seen 5% in quite some time now.
The rates looked very different in early November. On November 9, 2010, the 30 year conforming loan was at 3.875% and the high balance loan was at 4.25%. The biggest increases in interest rates happened on 11/16/2010 and today.
It is becoming apparent that interest rates are taking larger steps upward and much smaller steps downward.
The average mortgage payment for a borrower taking a $400,000 (within the conforming limit) mortgage at 3.875% would be $1881 versus a payment of $2087 ($206more for the same loan amount) at the new 4.75% rate today. This also correlates into an additional $5500 annual income for the same borrower to qualify for the same loan amount now.
The average mortgage payment for a borrower taking a $700,000 (within the high-balance conforming limit) mortgage at 4.24% would be $3444 ($314 for the same loan amount) versus a payment of $3758 at the new 5% rate today. This also correlates into an additional $8500 annual income for the same borrower to qualify for the same loan amount now.
Investor opinion about the economy has been widely diverse this past one month. This is a strategy that is usually implemented by investors and lenders when they want to discourage lending activity until there is a better perspective of the direction the economy will take the market.
This shift in the market will further slow housing activity until early next year when the market adapts to a better interpretation of short term economical data versus long term data and outlook. These two have been the most contradictory in the past month.