Refi Wave on the Way?
While mortgage rates haven’t kept pace with the plummeting Fed Funds Rate, the 30-Year Fixed rate has come down almost 75 basis points in recent weeks to a national average of around 5.7% yesterday. The recent trend got a boost last week from comments by Ben Bernanke that the Fed, which doesn’t have much fire…
While mortgage rates haven’t kept pace with the plummeting Fed Funds Rate, the 30-Year Fixed rate has come down almost 75 basis points in recent weeks to a national average of around 5.7% yesterday. The recent trend got a boost last week from comments by Ben Bernanke that the Fed, which doesn’t have much fire power left with its signature rate (how much lower than 1% can you go) may start trying to impact the long end of the curve by purchasing U.S. Treasurys. According to Bloomberg, refinancing can already make sense for home owners with existing mortgages of 5.5% or higher. Presumably a wave of refinancings would help both the real estate market and the overall economy, generating fees for banks a lowering carrying costs for owners. Have any readers been looking into refinancing? Excuse us while we go have a look at the fine print on our mortgage now.
Long Bond Returns Most Since 1995 [Bloomberg]
30-year Fixed Mortgage Rates Down Tuesday [Bankrate]
Graph from Seeking Alpha
Standard “refi incentive” is when the rate is about .5% below your current rate. Good rule of thumb to use so the breakeven is about five years in the future (depends a lot on your principle amount), given your refi costs. After five years, you start saving money.
I feel that one of the arguments in the article continues the misleading assumption that fed funds is correlated with the mortgage rate: “While mortgage rates haven’t kept pace with the plummeting Fed Funds Rate”. Of course they haven’t (usually they move inversely)… you should be looking at the 10 year treasury note instead! This was posted on Bloomberg?
Given the even tone of your last post, I will respond seriously and without (much) snark.
“Slopefarm I hope you feel good because I do.”
I am glad.
“Can you afford to make mortgage payments when your “investment” is down 50%?”
Do you mean my investment in my house or my savings and investments in financial instruments? We meet our mortgage out of salaried income. If home value goes down from where it is, my mortgage won’t change. So I expect to cover it. Financial investments are for a longer horizon.
“So if you think poking at me will get you some satisfaction the go ahead have fun.”
Bit of a pot and kettle situation, don’t you think? If you hadn’t held me up as your Exhibit A of idiocy in this market, I would not have “poked” at you. There may be all kinds of stupidity out there in this climate. But if you want to make an example of me, you should expect that I will fight back.
2009 our financial climate will be very very different and I hope you wont make any mistakes….
I will try not to and wish the same for you.
“I’ll reply to you, What: where do you get 50% in 5 years? From the hat in which you keep your ass?”
Well Numbnuts right here…
“We know prices are falling. After being told for the past two years that our coop woudl sell at no less than $1.2MM, we are now told that it is in the $900sK. That’s 25% drop.
Posted by: BH76 at December 3, 2008 11:30 AM”
This is real world experience talking, not some shill connected to the Mutant Asset Bubble.
Greed and Denial are very bad things…
The What
Someday this war is gonna end…
I’ll reply to you, What: where do you get 50% in 5 years? From the hat in which you keep your ass?
Slopefarm, your patience and spelling are admirable!
Slopefarm I hope you feel good because I do. Ask yourself this question. Can you afford to make mortgage payments when your “investment” is down 50%? Please you don’t need to reply, you need to ask yourself. Time is equal to money and 5 years from now will be very different. So if you think poking at me will get you some satisfaction the go ahead have fun.
2009 our financial climate will be very very different and I hope you wont make any mistakes….
The What
Someday this war is gonna end…
BH76 – who advised you on the past and present suggested asking price? Was it a broker from one of the major brokerages?
wow – way to go slopefarm!
what — wow, I’ve really progressed today, from asshat to homeboy to idiot. At least I can spell appraiser and treasury.
I can assure you, what, that I know how to tell good comps from bad. A good comp is typically a house within a block or two of mine, of similar construction and condition to mine, closing within the last few months. I am not an appraiser (feel free to copy my spelling) but I think I have a decent layman’s sense of how they go about things. I keep good watch for comps in my area. I go to the open houses and track the closing prices.
I took out a HELOC more than a year ago, and the comps I found then matched those independently identified and used by the appraiser (there’s that darn spelling again) in valuing my property. The comps I have identified this time run 20-40% higher than last time around, and even the old appraisal (the word shares a root with appraiser, which should give you another spelling clue) gives me a bit of a cushion. (And, commonsense, I imagine I will close before there are enough new comps showing a 30% or more drop in my neighborhood to ruin any valuation, so the eventual trickle down you predict won’t hurt me unless I need to sell). I do my homework, what. And no, I am not worried that my comps are infected with deed fraud. I guess that makes me both an asshat and an idiot.
It remains a remote possibility that, despite the above, the appraisal will come in lower than I need. It happened to me once with WAMU when E-appraisit (see, there’s always an “a” before the “i”) insisted on using a bunch of tiny wrecks by the Gowanus and under the F train scaffolding as comps for my fully renovated house. Their loss was another bank’s gain. I got better terms elsewhere and a proper appraisal (I figure you can spell it by now). The worst that will happen to me in the event of a low appraisal (. . . ) is that I will go on paying my mortgage and I will continue to enjoy my life. I don’t have to take gleeful pleasure in the possible misfortunes of others to find joy and meaning in my own life. Again, I must be an idiot.
DIBS’s general point is right. Smart people are trying to find ways to use the current climate to improve their their financial positions for the long haul. I would be curious as to what steps you have taken to improve yours and how you are faring. If your entire strategy in this economy consists of paying rent and taking uninformed potshots at others, your opinion isn’t worth much. If you have shown some market savvy in your own life, you ought to post what you’ve been up to. It would improve your credibility around here.