Home Equity Loans Gain Attention Over Refinancing

While the economic expansion continues to broaden, inflationary pressures are sending interest rates up.



The demand for mortgages declined during the week ending November 19, 2004, with the MBA index decreasing by 5.7% to 715. Both the refi and purchase components of the index fell. MOrtgage activity appears to have increased according the Mortgage Loan Search Network at http://www.mortgageloansearch.cc -



Consumer appear to be opting for home equity loans and cash out mortgage refinancing programs. Consumers seem to see this as a way to acquire funds for seasonal purchases and to cut down personal debt.



The greenback remains vulnerable. Clear path to further declines in the dollar.



Freddie Mac announced new maximum loan limits for next year. They said that they will purchase loans for single family homes up to $359,650, a sizable increase from this year's $333,700. Fannie Mae will likely follow suit in the next day or so. This would mean that borrowers can avoid jumbo rates for loans up to $359,650, which is approximately .375 of a percent higher than conforming rates.

Home Refinancing Tips

Home Refinancing Tips

Tip 1. Don't wait until mortgage interest rates drop by 2 percent before you consider refinancing your mortgage.

The decision to refinance your home is dependent on many things, including how long you plan to be in the house, how much lower the interest rate will be on your new loan, the closing costs for the new loan, your equity position in the home, and whether you plan todo a cash-out refinancing.

Tip 2. Using your current mortgage service may or may not save you money and time. The mortgage market is divided into three lines of business: mortgage origination, mortgage servicing and mortgage lending.

If the firm that originated your existing mortgage didn't retain the servicing, then you aren't a current customer. If the firm servicing the mortgage doesn't do originations in your market, then they may not be interested in your business.

It's best to use online lending marketplaces as these specialize in such issues and are equipped to provide services needed at competitive rates.

Tip 3. Many lenders require that you have at least 10 percent equity in your home (i.e., a loan-to-value (LTV) ratio of 90 percent or less). But when using the online lending marketplace consumers are connected to lenders willing to underwrite loans in which the borrower had only 5 percent equity in the home. Beware, however,that low equity loans can involve relatively high mortgage insurance costs.

How Fed Hikes Impact Long Term Mortgage Long-term rates generally rise to some degree as the Fed tightens monetary policy, particularly when it's clear that the Fed is embarked on an extended tightening process.

Between June 29 and Sept. 22, the 10-year Treasury yield declined by 65 basis points while the federal funds rate rose by 75 basis points. At that time we saw long term rates plummet and short term rate rise.

How could this happen? First, evidence of the mid-year "soft patch"in real economic growth; second, the slowing in core inflation from the surprising acceleration earlier in the year; and third, lower probabilities of aggressive tightening by the Fed down the line.

The "soft patch" is becoming passe, and the transitory factors that boosted core inflation earlier in the year apparently have unwound. That said we now see mortgage rates rising steadily and can expect this to continue as the Fed execute further rate hikes in the months to come.

If the hikes are small and spaced consumers have a chance to lower mortgage interest rates on long term home loans by refinancing at low rates points and fees and take advantage of a rapidly shortening window of opportunity to get back future income loss. 

In The News: The Fed's meeting statement revealed that the committee had raised its target forthe feds funds rate by another 0.25%, lifting it to2.00%. The hike is part of a credit tightening campaign to bring rates back up to more normal levels now that the economy's recoveryfrom the 2001 recession is more deeply rooted.



Tip of The Day

Cash out refinancing may help assist consumers during the heavy buying season. Many borrowers stretch the funds out over several buying seasons as much as five years or so while including things like funding a business, providing a second income, saving for college tuition and investment funds. In this way cash-out refinancing proves to be a smart investment in ones future.



When refinancing your home saving money by lowering interest rates,monthly payments and saving thousands of dollars over the life ofthe loan is of primary concern.



MAKE "APPLES TO APPLES" INTEREST RATE COMPARISONS

When faced with the need to compare different rate/point combinations among lenders, first convert each quoted rate to one based on a constant number of points and then find the lender with the lowest rate. In making this conversion, consumers should use a traditional rule of thumb that equates each point to a 1/4 of 1percent change in the interest rate. This would make an 8 percentloan with 0 points equivalent to a 7.75 percent loan with 1 point.



DON'T JUDGE A LENDER BY ITS APPLICATION COSTS

Lenders who lure you with no costs at application can lay the fees on heavily at closing. Keep your eyes focused primarily on the interest rate and points. 

Mortgage Rate Watch - Rate Shopping Tips
The News:Fed Boosts Interest Rate One-Quarter Point The Federal Reserve hiked a key short-term interest rate by one-quarter percentage point Wednesday, the fourth increase this year.It's part of a credit tightening campaign to bring rates back up to more normal levels now that the economy's recovery from the 2001 recession is more deeply rooted.

Tip of The Day
Mortgage rates are likely to continue climbing if the bond market anticipates more rate hikes. 1 year adjustable rate mortgage will feel the impact of a rate hike. Home equity loans, HEL's, are notimpacted by rate hikes.To find loan programs and lenders that may fit your criteria.

Mortgage Refinancing Rates Hit Six Month Low

Long-term mortgage rates are at a six-month low nationally, with the average 30-year fixed-rate mortgage falling to 5.64 percent, down from last week's 5.69.


The lower mortgage rates have spurred sales of both new and existing homes, which climbed in September to the third-highest levels in history.


Housing affordability remained historically high in September. Last week, the refinance share of overall mortgage activity inched up from 44.5 percent to 45.6 percent, according to the Mortgage Bankers Association. From the look of current rates and the fact that housing purchases are heading for a seasonal decline now is probably a good time for homeowners to refinance to consolidate debts or cash out equity.

Mortgage Rates Hold Low And Steady - Good Time To Refinance?

The three month trend shows mortgage rates in the upper-mid five percent range with small fluctuations upward and downward. Over-all mortgage rates may continue in this trend for now.



The 30-year Conventional Fixed Rate Mortgage was at 5.653 percent from 5.64 percent.



The 15-year Conventional Fixed Rate Mortgage was at 5.079 percent from 5.067 percent.



Many homeowners are now refinancing mortgages a second time in order to save thousands of dollars more over their current refinance program. See if a first or second refinance program will save you more on your monthly payments and tens of thousands over the term of you loan.

Mortgage Rates Drop To Three Month Low

The average 30-year fixed rate mortgage fell to a three-month low of 6.06 percent from 6.11 percent last week, according to a weekly national survey of large lenders. The 30-year fixed rate mortgages in this week's survey had an average of 0.32 discount and origination points.



The 15-year fixed rate mortgage popular for refinancing dipped from 5.5 percent to 5.47 percent.



Mortgage rates have decreased in response to several economic factors including slower than expected job growth, sluggish retail sales, and a drop in housing starts. This all increases anticipation for measured series of interest rate hikesby the Federal Reserve's rate-setting committee.



How To Save When Rates Drop

Consider the fact that just two months ago the average rate was at an eight-month high of about 6.40 percent, the monthly payment for a $165,000 loan was about $1,030. With the average 30-year fixed mortgage rate now at about 6.0 percent, the monthly payment for the same size loan is less than 999 with a savings of $30 per month and about $12,000 over the loan term.



Those seeking to refinance of purchase a home would do well to consider taking advantage of current rates.

Future Fed Hikes - Pain In The ARM

Fed Chairman Alan Greenspan spoke regarding future Fed rate hikes.



With all the worry over just how aggresively the Fed will hike rates it seems likely that there will be a stall in the treasury market causing mortgage rates to rise before the impending Fed hike that could take place any day now. That said it seems likely that rates will surge at significantly high levels in the days and/or weeks to come.



What will the outcome be? A Major pain in the ARM(Adjustable Rate Mortgage.) ARM Borrowers will feel the impact of the hike more so than fixed rate borrowers.



One senior economist says Americans are carrying a lot of debt and much more of it will be exposed when rates rises. 50 percent of new mortgages outstanding were Adjustable Rate Mortgages. As a result almost one quarter of total household debt would be affected instantly by higher rates, more than 70 percent higher than the exposure rate seen in 1994.



Rising rates will impact households by reducing buying power and less spending.



Good news for those who opted for fixed rate mortgages.

Six In One Hand Half Dozen In The Other

The long term and short term events impacting mortgage rate levels will be playing against the other.



May's Producer Price Index (PPI), which helps measure inflationary pressures at the producer level of the economy. Analysts expect to see an increase of 0.6% in the overall index. Rising inflation will cause investors to sell bonds, driving prices lower and mortgage rates higher.



If there is poor demand for Treasury sales mortgage rates will move higher shortly after the results are posted. If demand is strong bond prices will rise and mortgage rates will move lower. So where are rates headed based on the present data? In the short term rates may dip slightly but expect rates to rise steadily by weeks end.

Rates to Dip Before The Climb Continues

Trends indicate that rates have been steadily inching up although there have been a number of reversals as rates see sawed only to resume a rather jagged climb upward.



This is to be expected in the weeks and months to come with a little help from the Feds along the way. That said rates are still at very modest levels and ripe for home financing and refinancing.



An increase in unemployment and fewer new jobs than expected would likely create a stock market sell-off, leading to lower mortgage rates. This should create a slight upsurge in real estate financing and refinancing which would put more money into the economy on all levels.



All in all it looks like we may be heading for lower rates before they start climbing steadily again. But climb they will.

Do You Take This Rate ...For Better Or For Worse?

Things are getting a little tense for rate shoppers looking for a good match as mortgage rates inched up today. Stock market weakness and an upward revision in the labor market indicating higer levels of productivity than expected boded well for the bond market but not enough to lower rates.



The Labor Department will post May's Employment data early tomorrow morning. Fridays labor report is expected to be remain steady. An increase in unemployment and fewer new jobs than expected would likely create a stock market sell-off, leading to lower mortgage rates.



For those who made a commitment to low rates at a time when locking in fixed rates was good, life is bliss. Those who hesitated to say "I do" to refinancing are quickly finding out that things just aren't like they used to be. Tommorows Labor report will impact mortgage rates for better or for worse.

Holding Steady Freddie

The yield on the benchmark 10-year note that mortgage lenders use to

set rates fell to its lowest level in weeks. This edged mortgage

rates down from yesterday`s levels, but not enough to change them.

That said rates are holding pretty steady freddie. But we wouldn't call it an actual drop.

Whether rates dive into 5 percent bracket only time will tell. More interestingly would be the impact such a dive would have on the housing and mortgage market.

Home Buying Refinancing See Saw

Over the past several days mortgage rates have been on a see saw.

The likelyhood of mortgage rates heading up hinge on the the following IFs



If the fret over oil prices continues to subside and gas prices follow

If violence in Iraq settles

If shoppers continue snapping up homes and buying summer clothes.

If home sales continue to surg

If job claims decline

If manufactoring picks up

If mortgage rates continue steady

If real estate financing and resultant refinancing remains robust

If money saved from the past three year home loan refinance wave continues to go undepleted...

...if so rates can be expected to continue heading up.



Other Factors causing the see saw effect seen over the past week could bring interest rates down and trigger another refinance wave are little improvement in the Mid-East situation. Little imrovement in oil and gas prices. A significant increase in unemployment levels. An ongoing surge in home sales over the next six months would open the way for potential refinancing.



For now however home refinancing has decreased significantly as rates rise. Interest rates should stabilize and resultant home refinancing and home buying should move to modest levels but steady.

Rates Take A Dip - Hello Down There!

Rates take a dip on the charts indicating that the economy still has work to do getting itself on its feet. Still with rates as low as they are lenders and merchants wonder why loan activity has declined so sharply. It would seem that folks have greater incentive to pour borrowed money into merchant coffers while lowering their interest rates and perhaps saving a bundle on exhorbitant interest rate fees.



The question is how long will rates continue this dip and stall? At present there may be more factors leaning toward a continuation of the present scenerio over the short term. However it must be noted that June is likely to put new factors on the table one being the much loathed but highly expected Fed rate hike.



That said homeowners and buyers who have held out for better rates may see a quickly dimming light at the end of a rather short tunnel.

Yikes! Rate Hikes! - Will Rising Rates Hinder Economic Growth?

Mortgage rates have trended higher since mid-March with rising Treasury yields as data suggested faster U.S. economic growth and growing inflationary pressure. Higher mortgage rates have curtailed refinancing activities. Will this hinder economic growth? The experts say the economy will still continue to grow at a steady pace.



It's undeniable that the mortgage industry thrived on home refinancing alone while homeowners successfully locking in rate below 6 percent saved thousands in loan costs when refinancing.



Home refinancing became something of a staple. Home construction increased, renovation and remodeling boosted the real estate industry. If you got the cash out option you had more money to spend and that benefited merchants everywhere. Folks were seemly happy. Now however rates are rising and get this, the Feds seem intent on raising them further.



No big deal? Perhaps not, if it weren't for the fact that home refinancing is dropping off at an accelerated pace.



One wonders, if the economy can still turn itself around without the help of low interest rate home financing.



We cannot ignore the fact that home sales and construction have yet to show signs of dropping off. And recent mortgage rate trends show an actual dip in rate levels.



The average interest rate for 30-year fixed-rate mortgages in the MBA actually decreased to 6.21 percent from 6.32 percent from one week earlier



A comparison to previous years show that rates are still at attractive levels as many borrowers are still paying loan costs at 7.0-8.0% and others are seeking to benefit from shorter term loans where rates are under 6 percent. Not Bad, Huh? ...time will tell.



Still I must admit friends and family made out like a fat cat these past three years taking advantage of historic rates and refund benefits. I pity the fool who let this opportunity get by him. read more here

Where Are Rates Headed? This Way!

Interest rates steady move in the upward position has slowed over the past several days. Meanwhile mortgage applications to purchase fell 8.1 percent and refi applications dropped by almost 17 percent from the previous week, accounting for only 37 percent of all mortgage applications.



Where were rates one year ago? 5.125 percent and heading lower. Refis made up 76 percent of applications.



Todays Rising yields did not move high enough to influence mortgage lenders to raise rates to the next level on most products. Upcoming economic reports showing weakness could impact rates for a slight dip otherwise rates should remain steady.

What A Ride - Interest Rates May Dip Slightly

Yesterday was quite some ride. I'm still reeling from it all.

A trio of negative developments on the financial and political level sent prices of oversold U.S. Treasury securities to their highest levels in weeks, as yields edged down. The bombing in Baghdad frustrated Iraq self-governing transition efforts. Then there was the impact of the surprise election of the Congress party in India on its economy.


The Price of oil hit a new high causing further concerns about the effect of soaring oil prices on U.S. economic growth. Add to this the fret about when the Fed will increase interest rates and Poof! The stage is set for a slight decrease in mortgage rates.


From the looks of things I'd say if other economic reports come in weaker than expected and global events continue to influence traders to buy Treasuries, prices will rise and yields will fall. This scenario could result in a slight to significant decrease in some mortgage rates. What then? I've got my ideas.