Mortgage Rate News

When you get ready to buy a home, one of the most important factors is the mortgage interest rate. However, with things as they are, even having good credit and getting your mortgage application approved does not mean that you will automatically get the best rate. Indeed, choppy mortgage rates mean that you need to be prepared to lock in rates when they are lower.

The Mortgage Reports Blog points out some interesting facts about mortgage rates since the beginning of the year:

• Mortgage rates changed 68 percent of the days for the two months ending on May 19.
• Mortgage rates changed 73 percent of the days for the two months ending on June 20.
• Right now, mortgage rates change during the day 82 percent of the time.

This means that the mortgage interest rate you are quoted may be different the next day. Heck, the quote you got in the morning may not be the same quote you get in the afternoon. And with things as volatile as they are, you never know whether that change will result in your mortgage interest rate going up or down. Here is what The Mortgage Reports Blog recommends in the current climate:

When you’re shopping for a home loan, remember that Wall Street often sets the rates — not the loan officer. Your best protection from mortgage rate volatility, therefore, is to saddle up with a pro that understands how Wall Street works, and then be prepared to lock your mortgage rate as soon as possible.

Your mortgage interest rate can make a big difference

Mortgage rates matter because they make a big difference in how much you pay overall on your mortgage. Even half a percentage can determine, over the full course of a 30 year mortgage, a difference of tens of thousands of dollars in how much you pay back.

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There has been a lot of scrutiny regarding Fannie Mae and Freddie Mac, the two government chartered mortgage lenders that are the biggest buyers of home mortgage loans in the country. There are worries that the banks might fail, and even suggestions by some that the mortgage loans that the two banks have be divided up and redistributed to Fannie and Freddie according to “good” and “bad”.

But what you may not be hearing much about is the prospect that regular (or conforming) home mortgage loans could become more expensive. The evidence for this is a recent filing with the SEC by Freddie Mac. Every so often companies have to make a filing with the SEC to explain where they are at in their finances, and warn of future changes. The Mortgage Reports Blog cuts through the legalese and double-speak to let you know exactly what Freddie is proposing for home mortgage loans, and how it may affect you:

Loan-level fees, you’ll remember, are mandatory charges on a mortgage. Not closing costs, per se, but an interest rate adjustment to every mortgage application.

In this sense, Freddie Mac’s plan to add new loan-level pricing adjustments is like a tax on borrowing and would mark the third round of such fees since loan-level pricing adjustments were first introduced December 2007.

Mortgage rates used to based on the price of mortgage bonds alone. Today, it’s bond prices plus fees from Freddie (and Fannie). In other words, even if Wall Street mortgage rates fall later this year, Main Street mortgage rates could still rise because of new, mandatory borrowing fees for all mortgage applicants.

It’s not enough that the subprime mortgage market mess has created conditions in which it is harder to get mortgage financing; mortgage lenders are exacerbating the problem by adding new fees into the mix.

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For the second week in a row, mortgage interest rates are dropping. This is good news for would-be homebuyers who have had to contend with higher interest rates, even as the mortgage market stagnates. This could also be good news for mortgage lenders, who have been giving out fewer loans. Lower mortgage interest rates could lead to an increase in loans given out.

Lower interest rates save you money when financing your mortgage

Interest is the money you pay for the privilege of borrowing. When financing your mortgage for a home purchase, you interest charge is simply money that goes straight to the bank. You do not see any benefit from that portion of your mortgage payment.

The higher your interest rate is, the more money goes to the mortgage lender. This means that you pay more money when mortgage interest rates are higher. For a home that costs around $200,000, spread out over a period of 30 years, a 1% difference in mortgage interest rates can mean a difference of tens of thousands of dollars that you pay extra to the mortgage lender.

Lower mortgage interest rates dropping can make things more affordable for homebuyers. And that is important right now. It can make it easier for buyers to get home mortgage loans on foreclosures (which are becoming sought after by buyers and investors alike) right now.

How long will mortgage interest rates stay low?

Even though mortgage interest rates are dropping right now, things could change next week. Mortgage rates have been volatile, and Realtor.org reports that there could be reversal of the current trend:

Amid the nervousness, mortgage rates touched lows not seen since the first week of June. But inflation remains an issue, as evidenced by the Consumer Price Index for June, and will continue to spar with weak economic growth as the factors influence the direction of mortgage rates. The up and down yo-yo of mortgage rates seems likely to continue, with rates fluctuating within a range.

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