Posted: Oct. 30, 2008
The roller-coaster ride continues with mortgage rates. This week, they climbed to the highest level in three months, matching the highest level of the year.
The benchmark 30-year fixed-rate mortgage rose 45 basis points, to 6.77 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.39 discount and origination points. One year ago, the mortgage index was 6.29 percent; four weeks ago, it was 6.41 percent.
The benchmark 15-year fixed-rate mortgage rose 53 basis points, to 6.46 percent. The benchmark 5/1 adjustable-rate mortgage rose 18 basis points, to 6.67 percent.
| Weekly national mortgage survey |
 |
| Results of Bankrate.com's Oct. 29, 2008, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan: |
| 30-year fixed | 15-year fixed | 5-year ARM | |
| This week's rate: | 6.77% | 6.46% | 6.67% |
| Change from last week: | +0.45 | +0.53 | +0.18 |
| Monthly payment: | $1,072.38 | $1,433.70 | $1061.43 |
| Change from last week: | +$48.92 | +$47.57 | +$19.60 |
The 30-year fixed reached 6.77 percent in Bankrate's July 23 survey. That's the highest it has been all year. The last time the 30-year rate was higher was in Bankrate's survey July 18, 2007, when it averaged 6.82 percent.
With mortgage rates this volatile, it's difficult to pin down the cause for the twists and turns. Dick Lepre, senior loan consultant for Residential Pacific Mortgage, in San Francisco, traces it to a surge in the issuance of commercial paper -- short-term debt that companies issue.
The Federal Reserve has started to buy commercial paper, breaking the ice in an important part of the frozen credit markets. Now that corporations are more able to borrow, their prospects look brighter -- and that development led to Tuesday's 889-point rise in the Dow Jones industrial average.
Lepre believes that investors sold mortgage-backed securities (among other investments) to buy stocks -- and that sell-off led to the rise in mortgage rates.
Swinging rates frustrate
This month, the benchmark rate on the 30-year fixed fell 21 basis points, then rose 54 basis points the next week, then fell 42 basis points the week after that, followed by this week's rise of 45 basis points. Mortgage rates seldom move in such wide swings. It's frustrating to borrowers who want to snag the best rate.
"It makes it difficult, particularly when you have clients who are preapproved, out looking for homes," says Dan Dowling, president of United Mortgage Capital in Altamonte Springs, Fla. "There's so much (housing) inventory, it's tough for them to decide which one. Then combine that with extreme volatility of interest rates."
He counsels homebuyers to get a good deal on a house -- that's not difficult with Florida real estate -- and to grab a good interest rate when an acceptable one passes by.
Lately, a mortgage rate is "like the weather in Seattle," he says. "If you are disappointed with it, wait a while and it will change."
source: bankrate.com
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