Mortgage backed securities finished the day yesterday with a slight improvement over Monday. For the day today (Wednesday) mortgage pricing is showing a slight rebound as bond pricing is up slightly.
I read this article earlier today: My comments have been added in red.
--------------------------------------------------------------------------
Fixed-rate mortgages continue to fall
Rates on 30-year fixed-rate mortgage at lowest since 1971: Freddie Mac
By Amy Hoak, MarketWatch
Last Update: 10:42 AM ET 12/24/08
CHICAGO (MarketWatch) -- Fixed-rate mortgage rates fell again this week, with the 30-year fixed-rate mortgage setting another record low, at least since Freddie Mac began doing its weekly survey in the early 1970s. (Current rates are slightly higher than this weeks past lows)
The 30-year averaged 5.14% for the week ending Dec. 24, down from last week's 5.19% average, according to the survey, released on Wednesday. It was more than a full percentage point below its 6.17% average a year ago, and hasn't been lower since Freddie started doing its rate survey in 1971.
Fifteen-year fixed-rate mortgages averaged 4.91% this week, down from 4.92% last week and 5.79% a year ago. The mortgage hasn't been lower since April 1, 2004, when it averaged 4.84%.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.49% this week, down from 5.60% last week and 5.90% a year ago. One-year Treasury-indexed ARMs averaged 4.95%, up slightly from 4.94% last week yet still down from 5.53% a year ago.
To obtain the rates, the 30-year fixed-rate mortgage required payment of an average 0.8 point (in other words, if you wanted a loan with 0 points and standard closing cost, the average rate would have been almost .25% higher than the rates shown above), the 15-year fixed-rate mortgage required an average 0.7 point and the ARMs required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.
"Interest rates on 30-year fixed-rate mortgages eased for the eighth straight week and set another record low since Freddie Mac's survey began in 1971," said Frank Nothaft, Freddie Mac chief economist, in a news release. This is true. However, like the stock market we have seen movements both up and down with current rates higher than this last weeks lows, but still at record low levels, just not as favorable as this past weeks low point.
"Real GDP growth fell 0.5% in the third quarter of the year, pulled down by the largest drop in consumer spending since the second quarter of 1980. The market consensus calls for an even larger decline in the last three months of the year," he said. And the housing market continues to contract, Nothaft added.
"Existing home sales (excluding condominiums and co-ops) fell 8.6% in November to 4.0 million houses (annualized) in November, representing the slowest pace since July 1997. Moreover, the median sales price fell 12.8% from November 2007, the largest 12-month decline since records began in January 1968, according to the National Association of Realtors," he said in his comments. Read more on the decline in home sales and fall in home prices.
---------------------------------------------------------------------------
My point is most people will look at the headline and a rate and will stop there. The average client does not understand the the average rate includes points. Point buy you a better rate and are not common in our market. In addition, you have cost to take into the equation. Far too often clients look at rate only and do not look at the total cost of a transaction.
In rare cases, does it make sense to pay points. In situations where one is refinancing more often than not you are better off not paying closing cost and taking a slightly higher rate. As always we will work the numbers for clients both ways to help them figure the option that is best for them. If you are looking strictly at rate, more often then not you will select the option that is the worst one for you.
I wish you a great Christmas holiday and hope you take time to enjoy your family.
God Bless!
