December 5, 2013

Mortgage Rates Tick Up To Near Two-Year High

Mortgage%20Market%20Survey%2012-5-13.gif

As we wrote two weeks ago:

Absent any big negative economic news, the Fed’s talk of tapering its bond purchase program will likely cause mortgage rates to tick back up despite the Fed's concerns and intentions.

The average rate for a conforming 30-year mortgage has since ticked up from 4.22 to 4.46 percent and to within 12 basis points of the 4.58 percent two-year high recorded this past August, 1.15 percentage points higher than the all-time low of 3.31 percent recorded in November of 2012.

The average 30-year fixed mortgage rate was 3.34 percent at this time last year having averaged 6.71 percent since 1990 and 8.61 percent over the past 40 years.

In terms of the 30-year rate for Jumbo loans over $625,500, Wells Fargo is currently advertising a rate of 4.125 percent, a discount of half a percent as compared to the 4.625 percent rate they’re advertising for both regular conforming and super conforming loans over $417,000 in high cost areas like San Francisco.

Fixed Mortgage Rates Jump [Freddie Mac]

First Published: December 5, 2013 8:15 AM

Comments from "Plugged In" Readers

Looks like my I/O ARM is going to be adjusting downward for the 3rd year in a row. It is tied to the 1 year LIBOR which is currently .58 (was .86 last year and 1.1 something the year before that), so should actually break under the 3% mark. It resets in January so fingers crossed that the short term rates don't tick up in the next month.

Posted by: Rillion at December 5, 2013 11:02 AM

Rillion:

Is that an Option IO ARM (aka, option to make the principal payment if you want)? A number of friends of mine took those about 6-7 years ago and have been laughing to the bank every year since.

My hearty congrats!

Posted by: JustLooking at December 5, 2013 11:57 AM

Yes, I believe it was labeled a Option I/O 5/1 ARM (but it was never one of those reverse amortaztion ones that allowed paying less than the interest due each month). Interest only for 10 years, was fixed for the first 5 (at 6.25%, then reset annually to 1-Year LIBOR + 2.25, no floor). No pre-payment penalty, so I can make principal payments if I so choose, but I haven't made any yet. Current rate is 3.125% and if LIBOR remains where it is for the next month then it would reset to 2.875%.

Posted by: Rillion at December 5, 2013 1:45 PM

Nice, good luck on breaking the 3% level!

I'm trying to refi right now on a jumbo ARM, and the lowest rate for best credit is below 2.5%, although I doubt I'll get that as my credit and assets are not likely good enough to qualify for their best rates...

I'm hoping I can stay under 3%, but we'll see...

Posted by: lyqwyd at December 5, 2013 3:14 PM

Yes, I had a 5yr I/O adjustable that reset to 2.625. As hard as it was to bite the bullet, I finally decided to refinance this year to a fixed rate 3.0% 15 year loan. At the time, I contemplated letting it float for the short term savings, but I liked the stability of a fixed rate.

At some point, the rate will reset higher for you Rillion but probably not for another couple of years.

Posted by: Lance at December 5, 2013 6:14 PM

ARMs have been the way to go for a long time. If I were planning to stay in a place five years or less, I would still go with an ARM today. More than five years, I would go with a fixed rate. By that time, ARM rates will have climbed significantly higher than today's fixed rates.

Either way, money is really cheap now. Finance as much as you possibly can.

Posted by: anon at December 6, 2013 8:25 AM

^ exactomundo!

I had a libor arm too at less than 3%, but with 21 years left, and I planning to hold the prop long term, I refied it a few months back at 3.75 30 yr fixed.

Rates are still fantastic, and a primary motivation for me to get into another investment property sooner than later. I'm now working on a $500k HELOC so I can have some muscle in this market.

But to really take advantage of these rates I'll need to buy 2-4 units (for a 30 year fixed product.) I really like what's happening on 24th st in the mish, and fantasize about a mixed use bldg, but then I kiss the 30 year fixed rate goodbye- those bldgs do not qualify, and you're stuck with a commercial type loan, usually 3-10 years fixed rate.

I dunno, it just seems like such a good idea to lock in for 30 years if you find something you really like and can make it work as an investment. Hard in this city, but it can be done. I may have to go into D10, like Bayview or Excelsior. I'm still trying to figure out if this upcoming RE cycle is the time these neighborhoods really pop in value. Hard to tell, and I have my doubts. The mish is done and pretty much most of central SF, with the exception of the loin and parts of soma/mid market.

Oy, decisions, decisions!

Posted by: poor.ass.millionaire (formerly 49yo hipster) at December 6, 2013 8:50 AM

How does one secure a $500k HELOC? I was told that Citibank/Chase can only do up to $250k HELOC, regardless of LTV. Man, I'm missing out!

Posted by: jack at December 6, 2013 10:50 AM

I'm pretty sure chase will go to 500. I work with Wells Fargo private banking division and they do it.

Posted by: poor.ass.millionaire (formerly 49yo hipster) at December 6, 2013 10:57 AM

Yeah, I know the rate will eventually start to reset higher but unfortunately the property value is still not high enough that I can readily refi. The primary mortgage is not a freddie/fannie owned so it does not qualify for a lot of the hamp/harp programs and my income has increase over 50% since I took out the loan so it is pretty hard to claim a 'hardship' in order to get a special refi.

Posted by: Rillion at December 6, 2013 11:00 AM

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