Borrowers Wait For Lower Mortgage Rates and Lose

According to Janna Herron, Associated Press real estate writer, "Homeowners who delayed locking in super-low mortgage rates – think close to 4 percent for a 30-year fixed – may have waited too long." Rates are beginning to creep back up. The 30-year rate rose to 4.61 percent from 4.46 percent last week. That is well above the 4.17 percent rate hit a month ago – the lowest level on records dating back to 1971.

“People thought for a while that rates would fall below 4 percent, and they hedged on that,” said New York mortgage broker and banker Andrew Toolin, who had just been on the phone with a client who is paying 5.875 percent on his mortgage. A month ago, the client passed on what now looks like a once-in-a-lifetime opportunity: the chance to refinance at 4.125 percent. That would have put $321 more in his pocket each month. He held out, thinking he could do even better. Now the rate is up to 4.75 percent. He could still shave money off his monthly mortgage payment, but not nearly as much – about $229.“He’s wondering if he should wait for rates to go back down,” Toolin said. “He’s talking to his wife tonight about what to do.”

What is making the rates start to climb? If you look back in prior PURTEE Team Blogs, you will see that interest rates are tied directly to investor buying and selling of Treasury Bonds. With the upcoming tax deal President Barack Obama and Republicans forged that could boost the economy next year if passed, we would see a freeze on tax increases for 2011 and other stimulus tax cuts take effect. A stronger economy would make the stock market a more attractive place to invest money. That’s a big reason why many investors are selling their safer Treasury bonds. As investors sell off these Treasury bonds, rates have to increase for them to compete in the investor market. These bonds help finance the mortgages. As more bonds come on the market, prices become depressed and yields have to increase. "Prices and yields move in opposite directions."

We talk about the pendulum... which we actually thought would start to swing earlier in the year. Everyone wants to buy at the lowest rate and for the lowest price. We hear it every day. The issue is the uncertainty that lingers as to where the bottom truly is. What we do know is that buy the time the general media says it is time to buy, the real opportunities have been left behind. For additional mortgage information, check out our website... Click Here.