Dallas Home Appraisals News and Information

Although we are always interested in what mortgage rates are doing, our interest became even more personal last week as we decided it might be time to "pull the trigger" on our own home refi.  We feel good about finding a rate of 4.875 with no points (except the 1% loan origination fee that seems fairly standard but does not reduce the rate), closing costs at around $2,000, and the option of making a one-time change in our rate during the 90-day lock period (for a fee equal to less than 1 point, which probably won't happen without a very significant drop in rates).

What made us decide that now is the time?  Whether and when to refinance is such a personal decision, but our thought is that the rate we've gotten is 1 point below what we're paying now, we've recouped our previous closing costs, and we intend to be in the house long enough to recoup the cost of this refi.  The big question of course, is will mortgage rates go even lower?  We're betting no, but even if we're wrong (which we may well be), even a drop to 4% won't make enough difference in our payments to make us remorseful.  Conversely, we would tend to second-guess ourselves with every rate tick upward.

Last Week's Rate Drop

After the Fed pledged to buy an additional $750 billion in mortgage backed bonds this year, rates last Wednesday fell to historic lows.  Overall, conforming mortgages fell to below 5% on the week.  Other good news last week also indicates that the economy may be on the uptick for now.  Some of the indicators: homebuilders are breaking ground on new homes again; first-time jobless claims are falling, and inflation is present and, therefore, deflation is not.

If the data continues to show gaining economic strength over the next 3-6 months, the stock market is likely to see gains that will draw cash away from mortgage bonds.  This would lead mortgage rates to rise, possibly indefinitely.  Remember, today's rates are artificially low, the cause being less economic fundamentals and more government intervention.  The historic lows occurred last Wednesday after the Fed's announcement, but rates were already up again slightly by the weekend.  And as preferable as a little inflation might be to deflation, inflation will cause rates to increase.

The higher rate trend could continue this week, depending on the newest economic data.  The stock market is surging today, perhaps in response to the government's announcement of its "toxic asset" plan.  If the perception is that the plan will lead to the issuance of new federal debt, mortgage rates will likely rise accordingly.  Other positive data released today was the Existing Home Sales report which, though showing sharp decreases in sales and prices of existing homes and condos since last February, showed modest gains for this February over the previous month in existing home sales and slight gains in prices.  This increase could have been stimulated by any one or a combination of current trends:  lower interest rates, declining sale prices, and declining job losses. 

Other key indicators coming out this week are Wednesday's New Home Sales report and Friday's Consumer Spending report, as well as President Obama's Tuesday evening address to the nation.  Any of these could be enough to push rates back up, but it's doubtful that rates will decrease in the next week or so.  But, who really knows? 

Mortgage rates can fluctuate from hour-to-hour and day-to-day.  If today's rate is a point or more lower than your current rate, now might be the time to refinance.  But remember, a number of factors go into determining the rate you can get, including your income (and ability to prove your income), your credit scores, the value of your home and the amount of your loan.  There are lots of internet sites which can help you determine what loans you might qualify for.  You can also sign up to have emails delivered to you when the interest rate hits a certain target (one place you can do this is the Pentagon Federal Credit Union - click here to sign up for their Rate Watch emails).

As you shop for rates, remember it is nearly impossible to time the market or interest rates.  As mentioned above, rates dropped quickly last Wednesday after the Fed's announcement of increased buy-backs, but just like most other times in the past 12 months that rates surprisingly dropped, they recovered upward in just 24 hours.  A couple of things that might serve to keep rates from dropping much further, at least in the short term:  an influx of new refi applications and the aforementioned increase in inflation. 

The general theory is that when mortgage rates plunge like they did last Wednesday, they rarely stay that low for very long.  Yet rates today are still considered in the historically low range.  Is it time for you to refinance or buy that first home?  Only you can decide.  But you don't have to do it alone.  If you need help maneuvering through the process - interest rates, points, lock periods, closing costs, etc. - please contact Blue Star Appraisals Inc. and let us put you in touch with a broker or lender who can guide you through the maze of options.