Mortgage rates are going up.

[Aharami]

My closing is June 30th. Was about to lock in the rate, but saw that it has jumped up considerably since a week or so ago. Why did it go up so much, and will it come back down to around 6% again soon? I want to wait a bit longer to lock it in since it is almost 6.7% now, but im afraid it might go up more. But then again, I dont wanna lock it in now and have it drop back down to 6.
What to do...
Home buying process is too stressful.

 

[MattCo]

I have wondered the same thing occasionally. My uneducated guess is that the 30 year note is more of a long term view and is not as affected by short term chop that we are seeing right now. Also, if the current situation continues, then maybe the risk for the bank on long term loans rises because it is possible that you could crater financially.

Dunno, Just a guess.

 

[radioouman]

I doubt that it will go back down soon. Once it is on a trend, it tends to stay that way for a few months. I stalled and my rate went up 1/8 of a point, so I locked it. I'm glad that I did.

 

[yllus]

At the moment banks don't have access to as much cash to lend out as they used to. They're also being more picky about who they lend to, and someone who qualifies at the higher rate is probably a better credit risk.

If you're in the U.S., I don't really see rates coming back down for another two years or so - but these are just the musings of someone else also in the real estate market as a consumer. Banks are going to be skittish for a while yet, and there are more losses yet to be realized.

 

[Capt Caveman]

You matter as well wait. Rates fluctuate up/down daily/weekly. Check bankrate.com for trends. I closed a couple of months ago, rates were at 6.5% but then suddenly dropped to 6% and I locked in there.

 

[LegendKiller]

lol, closing a house in the middle of the worst housing market since 1929.

Anyway. Mortgage rates are set off of long-term bonds, usually the 10-year. While that's a benchmark, the pricing also includes adjustments for several things wich feed into the overall spread above the benchmark.

1. Market liquidity. How much money is available? If there's less money than the market wants the market pays more for that money, more interest.

2. Sector risk. If there's more risk in the sector then investors will demand more compensation, even above individual obligor risk.

3. Inflation and raising rates. If inflation is expected to go up, meaning higher borrowing costs whether it's beause inflation or the Fed increases short-term borrowing costs, then long-term assets will increase. If you want to see how this works look at the forward-curve of interest rates. It shows what the market expects interest rates to be in the future. The liquidity you need NOW must adhere to rates across the entire future expectation, thus, if rates are going up, your rate will reflect that.

Right now, you're getting hit by expected increases in inflation/rates, your sector risk is high, and nobody is really deploying a huge amount of capital to residential mortgages right now. All of the money is in commodoties now.

 

[Capt Caveman]

Originally posted by: LegendKiller
lol, closing a house in the middle of the worst housing market since 1929.

Anyway. Mortgage rates are set off of long-term bonds, usually the 10-year. While that's a benchmark, the pricing also includes adjustments for several things wich feed into the overall spread above the benchmark.

1. Market liquidity. How much money is available? If there's less money than the market wants the market pays more for that money, more interest.

2. Sector risk. If there's more risk in the sector then investors will demand more compensation, even above individual obligor risk.

3. Inflation and raising rates. If inflation is expected to go up, meaning higher borrowing costs whether it's beause inflation or the Fed increases short-term borrowing costs, then long-term assets will increase. If you want to see how this works look at the forward-curve of interest rates. It shows what the market expects interest rates to be in the future. The liquidity you need NOW must adhere to rates across the entire future expectation, thus, if rates are going up, your rate will reflect that.

Right now, you're getting hit by expected increases in inflation/rates, your sector risk is high, and nobody is really deploying a huge amount of capital to residential mortgages right now. All of the money is in commodoties now.

Nothing wrong with buying a place now, rates are still relatively low and lots of bargains to be found.

 

[LegendKiller]

Originally posted by: Capt Caveman
Nothing wrong with buying a place now, rates are still relatively low and lots of bargains to be found.

Prices aren't going to be going up appreciably for a long time. You're just pissing away money if you're buying anywhere but Charlotte.

 

[Aharami]

Originally posted by: LegendKiller
3. Inflation and raising rates. If inflation is expected to go up, meaning higher borrowing costs whether it's beause inflation or the Fed increases short-term borrowing costs, then long-term assets will increase. If you want to see how this works look at the forward-curve of interest rates. It shows what the market expects interest rates to be in the future. The liquidity you need NOW must adhere to rates across the entire future expectation, thus, if rates are going up, your rate will reflect that.

Right now, you're getting hit by expected increases in inflation/rates, your sector risk is high, and nobody is really deploying a huge amount of capital to residential mortgages right now. All of the money is in commodoties now.

where can I find this info?

 

[LegendKiller]

Originally posted by: Aharami

Originally posted by: LegendKiller
3. Inflation and raising rates. If inflation is expected to go up, meaning higher borrowing costs whether it's beause inflation or the Fed increases short-term borrowing costs, then long-term assets will increase. If you want to see how this works look at the forward-curve of interest rates. It shows what the market expects interest rates to be in the future. The liquidity you need NOW must adhere to rates across the entire future expectation, thus, if rates are going up, your rate will reflect that.

Right now, you're getting hit by expected increases in inflation/rates, your sector risk is high, and nobody is really deploying a huge amount of capital to residential mortgages right now. All of the money is in commodoties now.

where can I find this info?

Googled for 5s and found this...


http://fixedincome.fidelity.com/fi/FIHistoricalYield

 

[rivan]

Originally posted by: LegendKiller

Originally posted by: Capt Caveman
Nothing wrong with buying a place now, rates are still relatively low and lots of bargains to be found.

Prices aren't going to be going up appreciably for a long time. You're just pissing away money if you're buying anywhere but Charlotte.

I would argue that, for people in proper position to be buying a home, a mortgage payment is money far better spent than rent, even if when the home is sold it sells for the same amount paid.

Edit: I think it's a perfect time to buy, if you're in the market for a 3+ year residence.

 

[Xavier434]

Originally posted by: LegendKiller

Originally posted by: Capt Caveman
Nothing wrong with buying a place now, rates are still relatively low and lots of bargains to be found.

Prices aren't going to be going up appreciably for a long time. You're just pissing away money if you're buying anywhere but Charlotte.

This depends on where you live, how long you plan to live in the house, and what you happen to find. There are plenty of cases out there where buying right now could be a wise decision.

 

[ICRS]

Mortgage rates have gone up becaused FNMA raised their rates at which they will securitize a mortgage. FNMA raised their rates because 10 year treasury has increased and it is a good measure of their cost of funds. Higher cost of funds means FNMA raises their required rates, thus banks raise their rates in response.

 

[LegendKiller]

Originally posted by: rivan
I would argue that, for people in proper position to be buying a home, a mortgage payment is money far better spent than rent, even if when the home is sold it sells for the same amount paid.

Hardly. Housing is a shitty "investment" that is nothing more than a giant vacuum out of your wallet. The "tax benefit" is nothing more than a government subsidy, paid for all of society, to reduce interest rates. You're still paying 2/3 of your rate (at best, 4/5 at worst). Once you include time, maintenance, taxes, insurance, and most importantly, *DEPRECIATION*, it's a losing asset in this market.

Most of your payments in the beginning are interest anyway, so all you're doing is paying the bank for the luxury of living in their house, no different than renting.

The scam that perpetuated the housing bubble is that housing was a good "investment" and saved so much more money, or gained money. That's a bald faced lie perpetuated by the NAR/MBA to get people to buy. It ignores the simple economics.

Will I buy a house when I think it's appropriate? Absolutely, but no way in hell I am buying now, you're just pissing money away. Why will I buy? Not for "investment", as a house is actually a pretty crappy "investment" historically.


edit: Your time horizon had better be more than 3 years. This downturn might stop by the end of the year but it won't be appreciating for another year or two to any appreciable level.

 

[IHateMyJob2004]

For profitability, they mortgage lenders need to have a spread betweeen their borrowing rate and the rate they lend at. Seeing how the housing market is not getting better, they need to charge higher interest rates in order to make more money in order to offset defaults.

 

[LegendKiller]

Originally posted by: ICRS
Mortgage rates have gone up becaused FNMA raised their rates at which they will securitize a mortgage. FNMA raised their rates because 10 year treasury has increased and it is a good measure of their cost of funds. Higher cost of funds means FNMA raises their required rates, thus banks raise their rates in response.

FNMA doesn't set the rates, investors set the rates, investor liquidity that is.

 

[Special K]

Originally posted by: rivan

Originally posted by: LegendKiller

Originally posted by: Capt Caveman
Nothing wrong with buying a place now, rates are still relatively low and lots of bargains to be found.

Prices aren't going to be going up appreciably for a long time. You're just pissing away money if you're buying anywhere but Charlotte.

I would argue that, for people in proper position to be buying a home, a mortgage payment is money far better spent than rent, even if when the home is sold it sells for the same amount paid.

Edit: I think it's a perfect time to buy, if you're in the market for a 3+ year residence.

Here is an excellent buy vs. rent calculator I found on the NYT. It even allows you to consider the growth of your money if you invested the difference between the cost of buying and renting:

link

 

[ICRS]

Originally posted by: LegendKiller

Originally posted by: ICRS
Mortgage rates have gone up becaused FNMA raised their rates at which they will securitize a mortgage. FNMA raised their rates because 10 year treasury has increased and it is a good measure of their cost of funds. Higher cost of funds means FNMA raises their required rates, thus banks raise their rates in response.

FNMA doesn't set the rates, investors set the rates, investor liquidity that is.

FNMA does set their own required rates, it is just determined by how much investors are going to charge them for funds. As investors raise their required interest rates on funds for FNMA then FNMA cost increases so they too must raise their rates.

 

[Special K]

Originally posted by: LegendKiller
lol, closing a house in the middle of the worst housing market since 1929.

Anyway. Mortgage rates are set off of long-term bonds, usually the 10-year. While that's a benchmark, the pricing also includes adjustments for several things wich feed into the overall spread above the benchmark.

1. Market liquidity. How much money is available? If there's less money than the market wants the market pays more for that money, more interest.

2. Sector risk. If there's more risk in the sector then investors will demand more compensation, even above individual obligor risk.

3. Inflation and raising rates. If inflation is expected to go up, meaning higher borrowing costs whether it's beause inflation or the Fed increases short-term borrowing costs, then long-term assets will increase. If you want to see how this works look at the forward-curve of interest rates. It shows what the market expects interest rates to be in the future. The liquidity you need NOW must adhere to rates across the entire future expectation, thus, if rates are going up, your rate will reflect that.

Right now, you're getting hit by expected increases in inflation/rates, your sector risk is high, and nobody is really deploying a huge amount of capital to residential mortgages right now. All of the money is in commodoties now.

Why are mortgage rates tied to the 10 year bond yield in particular? Why not the 30 year bond?

 

[Turin39789]

Originally posted by: rivan

Originally posted by: LegendKiller

Originally posted by: Capt Caveman
Nothing wrong with buying a place now, rates are still relatively low and lots of bargains to be found.

Prices aren't going to be going up appreciably for a long time. You're just pissing away money if you're buying anywhere but Charlotte.

I would argue that, for people in proper position to be buying a home, a mortgage payment is money far better spent than rent, even if when the home is sold it sells for the same amount paid.

Edit: I think it's a perfect time to buy, if you're in the market for a 3+ year residence.

8 - 12 months from now, that will be the time to buy

 

[LegendKiller]

Originally posted by: ICRS

Originally posted by: LegendKiller

Originally posted by: ICRS
Mortgage rates have gone up becaused FNMA raised their rates at which they will securitize a mortgage. FNMA raised their rates because 10 year treasury has increased and it is a good measure of their cost of funds. Higher cost of funds means FNMA raises their required rates, thus banks raise their rates in response.

FNMA doesn't set the rates, investors set the rates, investor liquidity that is.

FNMA does set their own required rates, it is just determined by how much investors are going to charge them for funds. As investors raise their required interest rates on funds for FNMA then FNMA cost increases so they too must raise their rates.

I work in securitization as a banker, I know how they set their rates and how much investors charge, thanks though.

Your first sentence implies that FNMA raised their securitization funding costs. The market raised their costs.

 

[ICRS]

Originally posted by: Special K

Originally posted by: LegendKiller
lol, closing a house in the middle of the worst housing market since 1929.

Anyway. Mortgage rates are set off of long-term bonds, usually the 10-year. While that's a benchmark, the pricing also includes adjustments for several things wich feed into the overall spread above the benchmark.

1. Market liquidity. How much money is available? If there's less money than the market wants the market pays more for that money, more interest.

2. Sector risk. If there's more risk in the sector then investors will demand more compensation, even above individual obligor risk.

3. Inflation and raising rates. If inflation is expected to go up, meaning higher borrowing costs whether it's beause inflation or the Fed increases short-term borrowing costs, then long-term assets will increase. If you want to see how this works look at the forward-curve of interest rates. It shows what the market expects interest rates to be in the future. The liquidity you need NOW must adhere to rates across the entire future expectation, thus, if rates are going up, your rate will reflect that.

Right now, you're getting hit by expected increases in inflation/rates, your sector risk is high, and nobody is really deploying a huge amount of capital to residential mortgages right now. All of the money is in commodoties now.

Why are mortgage rates tied to the 10 year bond yield in particular? Why not the 30 year bond?

Because mortgages have an average life of around 10 years.

 

[LegendKiller]

Originally posted by: Special K
Why are mortgage rates tied to the 10 year bond yield in particular? Why not the 30 year bond?

Securitized mortgage prepayment (full payoffs or sales) and curtailment (extra payments) give them a term similar to that of a 10-year bond.

 

[ICRS]

Originally posted by: LegendKiller

Originally posted by: ICRS

Originally posted by: LegendKiller

Originally posted by: ICRS
Mortgage rates have gone up becaused FNMA raised their rates at which they will securitize a mortgage. FNMA raised their rates because 10 year treasury has increased and it is a good measure of their cost of funds. Higher cost of funds means FNMA raises their required rates, thus banks raise their rates in response.

FNMA doesn't set the rates, investors set the rates, investor liquidity that is.

FNMA does set their own required rates, it is just determined by how much investors are going to charge them for funds. As investors raise their required interest rates on funds for FNMA then FNMA cost increases so they too must raise their rates.

I work in securitization as a banker, I know how they set their rates and how much investors charge, thanks though.

Your first sentence implies that FNMA raised their securitization funding costs. The market raised their costs.

Yes, the market is what raised their funding cost. FNMA just resonds to raise in cost.

 

[alkemyst]

Originally posted by: Turin39789

Originally posted by: rivan

Originally posted by: LegendKiller

Originally posted by: Capt Caveman
Nothing wrong with buying a place now, rates are still relatively low and lots of bargains to be found.

Prices aren't going to be going up appreciably for a long time. You're just pissing away money if you're buying anywhere but Charlotte.

I would argue that, for people in proper position to be buying a home, a mortgage payment is money far better spent than rent, even if when the home is sold it sells for the same amount paid.

Edit: I think it's a perfect time to buy, if you're in the market for a 3+ year residence.

8 - 12 months from now, that will be the time to buy

Depends on where and what. Problem is if one waits to the bottom, then everything is on it's way up. Rates are already increasing and home sales as well.

By 2009 it's doubtful any of hte top builders will still have inventory worth buying (condos will probably be all that's left).

Those that think renting is still better than home ownership are on the bottom tier usually though. Renting makes no sense when you factor in the costs.