So are sub 5.0 rates gone forever? The short answer is probably yes. While rates might briefly fall below 5 in the next month for the most part the era of sub 5.0 rates is over. Mortgage rates rose for the third straight week. The thirty year rate rose from 5.00 to 5.03. The 15 year rate rose from 4.43 to 4.46. The 5 and 1 year rates rose from 4.40 to 4.42 and 4.54 to 4.57. Its interesting to note that the 1 year arm has had a higher rate than the 5 year arm for the last few weeks. Below are rates for the last few weeks.

Oct 29, 2009
30-yr 5.03 15-yr 4.46 5-yr ARM 4.42 1-yr ARM 4.57

Oct 22, 2009
30-yr 5.00 15-yr 4.43 5-yr ARM 4.40 1-yr ARM 4.54

Oct 15, 2009
30-yr 4.92 15-yr 4.37 5-yr ARM 4.38 1-yr ARM 4.60

Oct 08, 2009
30-yr 4.87 15-yr 4.33 5-yr ARM 4.35 1-yr ARM 4.53

Oct 01, 2009
30-yr 4.94 15-yr 4.36 5-yr ARM 4.42 1-yr ARM 4.49

Apr 02, 2009
30-yr 5.05 15-yr 5.13 5-yr ARM 5.00 1-yr ARM 4.78

The only two mortgage products that are interesting is the 30 year and the 15 year fixed rates. With 1 year rates higher than the 5 year arm they are obviously pointless. And with current rates low compared to historical mortgage rates the lower rates of the 5 year arm (compared to the 30 year rate) don't seem worth the risk. In addition to mortgage rates lets look at mortgage payments. Taking today's rates we can translate them into a payment for a 200k mortgage. We did the same thing with rates from October 15th (2 weeks ago) and April 2 (6 months ago).

Oct 29
30-yr $1077.31
15-yr $1525.9
5-yr ARM $1003.88
1-yr ARM $1021.7

Oct 15
30-yr $1063.88
15-yr $1516.73
5-yr ARM $999.16
1-yr ARM $1025.28

Apr 02
30-yr $1079.76
15-yr $1595.16
5-yr ARM $1073.64
1-yr ARM $1046.91

A mortgage payment is about $13 more than 2 weeks ago and about $2 less than it was six months ago.

So why are rates rising? Although its a weak recovery, the economy by most accounts is experiencing a recovery. In addition, the government has lowered the amount of mortgage backed securities it was buying which was keeping rates artifically low.

So what is our advice to people interested in buying a house? It might seem obvious but I would lock in now instead of waiting. Almost all signs point to mortgage rates rising over the next few months. The real question is will the strengthing real estate market be able to withstand higher rates? We will have to wait to find out.


Ki writes frequently about the mortgage industry and mortgage rates. He caters to the real estate market in Austin. His site www.escapesomewhere.com www.escapesomewhere.com has information on historical mortgage rates along with a free mortgage widget.

The 30 year rate rose again this week rising from 4.92 to 5.00. Now in the last two weeks 30 year mortgage rates have risen from 4.87 to 5.00. Most of the other major mortgage products rose as well. The 15 year rate rose from 4.37 to 4.43. Both the 5 year arm rising from 4.38 to 4.40 and the 1 year arm was the only product to fall moving from 4.60 to 4.54.

While this is not a huge jump the question is are we seeing the tip of the iceberg with rising rates? The expectation has been that rates would rise as the economy improves. While the economy is by no means doing well it seems to be improving from what we have seen in the last year. Additionally, the government has lowered its volume of buying mortgage backed securities. This has helped mortgage rates to rise in the last two weeks and led to speculation of further rises. Below are rates for the last few weeks.

Oct 22, 2009
30-yr 5.00 15-yr 4.43 5-yr ARM 4.40 1-yr ARM 4.54

Oct 15, 2009
30-yr 4.92 15-yr 4.37 5-yr ARM 4.38 1-yr ARM 4.60

Oct 08, 2009
30-yr 4.87 15-yr 4.33 5-yr ARM 4.35 1-yr ARM 4.53

Oct 01, 2009
30-yr 4.94 15-yr 4.36 5-yr ARM 4.42 1-yr ARM 4.49

Sep 24, 2009
30-yr 5.04 15-yr 4.46 5-yr ARM 4.51 1-yr ARM 4.52

Mar 26, 2009
30-yr 4.85 15-yr 4.58 5-yr ARM 4.96 1-yr ARM 4.85

In spite of the increases rates are still relatively low. They are lower than at any point before January 2009 and lower than they were just last month. In addition to looking at rates we also like to see mortgage payments. Using our mortgage calculator we translated rates from October 22, October 8 and March 26 into a mortgage payment for a 200k loan.

Oct 22
30-yr $1073.64
15-yr $1522.84
5-yr ARM $1001.52
1-yr ARM $1018.12

Oct 08
30-yr $1057.8
15-yr $1512.66
5-yr ARM $995.62
1-yr ARM $1016.93

Mar 26
30-yr $1055.38
15-yr $1538.17
5-yr ARM $1068.75
1-yr ARM $1055.38

As we can see again there is not a huge difference. Compared to 6 months ago a mortgage payment is only 1.73 percent higher ($18.26 more a month).

So what is going to happen moving forward? The fear of rates hitting 12 percent has probably lessoned. Basically if the economy quickly recovered the speculation was that inflation could spiral out of control. Since the economic recovery seems to be a somewhat slow process the expectation is that mortgage rates and inflation will rise but it's doubtful they will move above 10 percent.

That said if one is looking at buying its best to lock in rates now considering that rates are rising and the expectation is that they will probably be higher a month from now.


Ki has lived and worked in Austin, Texas for over 10 years. He has a comprehensive understanding of Austin Tx real estate. His site provides graphs of historical mortgage interest rates along with a free mortgage calculator.

After falling for the last 6 weeks mortgage rates started to rise this week. The 30 year rate rose from 4.87 to 4.92. The 15 year mortgage rose from 4.33 to 4.37. Both arms rose as well with the 5 year arm rising from 4.35 to 4.38 and the 1 year arm rising from 4.53 to 4.60. Below are mortgage rates for the last several weeks along with mortgage rates from March 19, 2009.

Oct 15, 2009
30-yr 4.92 15-yr 4.37 5-yr ARM 4.38 1-yr ARM 4.60

Oct 08, 2009
30-yr 4.87 15-yr 4.33 5-yr ARM 4.35 1-yr ARM 4.53

Oct 01, 2009
30-yr 4.94 15-yr 4.36 5-yr ARM 4.42 1-yr ARM 4.49

Sep 24, 2009
30-yr 5.04 15-yr 4.46 5-yr ARM 4.51 1-yr ARM 4.52

Sep 17, 2009
30-yr 5.04 15-yr 4.47 5-yr ARM 4.51 1-yr ARM 4.58

Mar 19, 2009
30-yr 4.98 15-yr 4.61 5-yr ARM 4.98 1-yr ARM 4.91

Overall its not that interesting that rates moved up. Moving up .05 points is not that significant. For the last few months the speculation has been that rates are going to eventually move up. Additionally, the federal government has been pulling back on the amount of mortgage securities it was buying (which was pushing mortgage rates down). So the question is whether this weeks rise in mortgage rates was just normal volatility or the beginning of the steady rise in mortgage rates that some have been predicting. At this point it's an impossible question to answer for the most part we will have to wait and see.

In addition to rates it's also interesting to look at mortgage payments. We took today's rates and determined the mortgage payment on a 200k loan. We also did the same thing with rates from October 1st (2 weeks ago) and March 12, 2009 (6 months ago).

Oct 15
30-yr $1063.88
15-yr $1516.73
5-yr ARM $999.16
1-yr ARM $1025.28

Oct 01
30-yr $1066.32
15-yr $1515.71
5-yr ARM $1003.88
1-yr ARM $1012.18

Mar 12
30-yr $1077.31
15-yr $1544.33
5-yr ARM $1072.42
1-yr ARM $1049.33

Overall looking at mortgage rates/mortgage payments from 2 weeks and 6 months ago we are not seeing a lot of movement. Compared to March 12 (6 months ago) a mortgage payment on a 200k loan would only be $13.42 less a month or 1.24 percent less. By comparison if rates rise to 7 percent (historically about average) a mortgage payment would be 266.72 more a month or a rise of 25%. While a rise to 7 percent seems like a lot many experts are expecting rates to move up to 9 or 10 percent.

So what is our advice for people looking for a mortgage? First it's probably best to start looking for a mortgage early on in the home buying process. It's more difficult to get a loan and waiting to the last minute is not advisable. Additionally, it's probably advisable to lock in a rate earlier instead of later. While mortgage rates could fall its doubtful they could drop by much at this point. On the other hand it's possible that mortgage rates could move up dramatically. So there is more to lose than gain by waiting to lock in on a mortgage. If mortgage rates do start to rise dramatically it could deal a serious blow to the real estate recovery we are currently seeing in several markets around the country.


Ki works in Austin real estate. His site has different mortgage widgets to keep track of mortgage rates. His site escapesomewhere.com has information on Austin along with a blog focused on Austin Texas real estate

Marshalls are preparing to put Madoff's mansions on the market, and victims of his ponzi scheme are hoping to cash in big time. Based on court records, the FBI is revving up to sell an estimated $30 million in real estate and property, all of which will go to his victims. The three homes on the way to market are a penthouse in Manhattan, a Montauk beach house on Long Island and a waterfront Palm Beach retreat.

Vacation real estate Madoff owned in Côte d'Azur that was seized by the feds back in March has since been sold. The chic three-bedroom Cap d'Antibes home netted $1.48 million noted the Justice Department. Funds from the sale are being held at the U.S. Marshall's office.

Marshalls opened the doors to Madoff's Manhattan luxury penthouse earlier in September giving the public a glimpse into the lifestyle of the previously rich rip-off artist. The two-story apartment was the location of Madoff's confinement during his house arrest.

Four fireplaces, a baby Steinway piano, antique rugs, custom-made furniture and other fine furnishings must have made Madoff quite comfortable while carrying out his Ponzi scheme. U.S. Marshall Roland Ubaldo said that the Manhattan penthouse was the crown jewel of all Madoff's properties seized by the government. It's easy to see why with all the lavish decorations and furnishings.

A wraparound terrace provides a stunning view of southern Manhattan. His and her closets contain Madoff's handmade Belgian shoes and boxes of designer clothing that are all packed away and awaiting auction. His den does not disappoint, either, with cherry paneling and a leather bull - his personal trademark.

According to court filings, the apartment was valued at $7.5 million by the FBI. One New York appraiser has his doubts about the appraisal. Miller Samuel appraiser, Jonathan Miller, said that what he'd seen of it so far would be considered fairly modest, in his opinion. He cited that it was not actually a Park Avenue duplex, which is what the press coverage had been calling it. Its address is on 64th Street and it sits a block east on the corner of Lexington.

The Montauk beach house with 3,000 square feet of living space sits on a one-and-a-half acre prime lot atop a bluff overlooking an ocean beach. It sits closer to the water's edge than would be allowed today due to earlier more lax zoning regulations.

Feds estimate its worth at $7 million, but tax assessments indicate its value at $3.3 million. Regardless, one real estate agent noted that the history and high-profile of the home may cause it to sell for as much as $10 million. Purchased in 1980, the Madoffs originally only paid $250,000 for the home.

Listed under Madoff's wife's name, the Palm Beach hideaway is valued at $7.5 million. Featuring a pool, 8,753 square feet of living space, five-bedrooms and seven-bathrooms, the two-story home sits on a waterfront half-acre plot. Included in the property is a boat dock where Madoff parked his now-seized yacht, the Bull. It is a 55-foot fishing vessel reportedly worth $1.5 million.

Well shaded by lots of large trees and a large second-floor veranda, the house sits just down the shore from a location where Madoff lured in many of his victims, the Palm Beach Country Club.

Madoff is making amends in his not-so-luxurious jail cell and the hope is that the victims he left as carnage will be reimbursed for some of their loss and suffering.

Ki lives in Central Austin. He works in the Austin real estate market. His website lets people search the Austin MLS. His site also has information on Austin real estate as well as a search for Homes in Pflugerville

Mortgage Rates fell this week with the 30 year rate dropping from 5.42 to 5.32. They have fallen .27 points from their recent high of 5.59 reached on June 11, 2009. Rates are still up from the all time low of 4.78 they reached on April 30, 2009. Except for the 1 year arm the other major rates dropped as well. The 15 year fixed rate dropped from 4.87 to 4.77 and the 5 year arm dropped from 4.99 to 4.88. The one year arm rose slightly from 4.93 to 4.94. Below are rates for the last few weeks.

Jul 02, 2009
30-yr 5.32 15-yr 4.77 5-yr ARM 4.88 1-yr ARM 4.94

Jun 25, 2009
30-yr 5.42 15-yr 4.87 5-yr ARM 4.99 1-yr ARM 4.93

Jun 18, 2009
30-yr 5.38 15-yr 4.89 5-yr ARM 4.97 1-yr ARM 4.95

Jun 11, 2009
30-yr 5.59 15-yr 5.06 5-yr ARM 5.17 1-yr ARM 5.04

Jun 04, 2009
30-yr 5.29 15-yr 4.79 5-yr ARM 4.85 1-yr ARM 4.81

Dec 31, 2008
30-yr 5.10 15-yr 4.83 5-yr ARM 5.57 1-yr ARM 4.85

In addition to rates we also like to analyze mortgage payments. Using our free mortgage calculator we took today's mortgage rates and translated them into a mortgage payment for a 200k loan. We did the same thing with rates from June 25, 2009 and December 31, 2008 (6 months ago).

Jul 02
30-yr $1113.09
15-yr $1557.72
5-yr ARM $1059.02
1-yr ARM $1066.32

Jun 25
30-yr $1125.55
15-yr $1568.07
5-yr ARM $1072.42
1-yr ARM $1065.1

Dec 31
30-yr $1085.89
15-yr $1563.93
5-yr ARM $1144.37
1-yr ARM $1055.38

While a potential mortgage payment is down from last week it is up $27.20 (2.5 percent) from 6 months ago.

Although rates are low it's important to note that loans are not freely available. Banks are still extremely strict on the properties and individuals that will receive loans. For instance loans for non warrantable condos (where 50% or more of the units are rented instead of owner occupied) have pretty much disappeared. The credit scores thresholds needed for a loan have increased as well. So although mortgage rates are near historic lows the lending industry continues to be the biggest negative factor dragging on the real estate market.
So what do we expect to see moving forward? There is a huge upward pressure on mortgage rates because of the amount of borrowing the US government has engaged in over the last year. So while it's hard to know what is going to happen over the next month we should see higher mortgage rates in the next year. Since rates are going to be higher this is a good reason to avoid the 1 year arm since by the time the arm expires rates could be over 8 percent.

More importantly is whether the lending industry will ease up on some of the current mortgage restrictions. While when the market finally improves it's assumed some lending restrictions will disappear but it's doubtful that lending restrictions will ease up before then.


Ki lives in Austin Texas. His site provides a mortgage widget along with a free mortgage calculator. It also has a search for Austin Tx real estate.

Mortgage rates fell for the second week in a row. 30 year rates fell to a 40 year low to start the year dropping down to 4.96 on January 15th. After that rates rose up to 5.25. Now rates have fallen back to almost reach their previous lows. In fact this is the lowest rates have been in 40 year with the exception of the first two weeks of 2009. Below are rates for the last few weeks.

Feb 19, 2009
30-yr 5.04 15-yr 4.68 5-yr ARM 5.04 1-yr ARM 4.80

Feb 12, 2009
30-yr 5.16 15-yr 4.81 5-yr ARM 5.23 1-yr ARM 4.94

Feb 05, 2009
30-yr 5.25 15-yr 4.92 5-yr ARM 5.26 1-yr ARM 4.92

Jan 29, 2009
30-yr 5.10 15-yr 4.80 5-yr ARM 5.27 1-yr ARM 4.90

Jan 22, 2009
30-yr 5.12 15-yr 4.80 5-yr ARM 5.24 1-yr ARM 4.92

The 5 year Arm fell quite a bit this week and is now equal to the 30 year rate (This is the first time since November 20, 2008 that the 5 year arm is not above the 30 year arm). But it's still a pointless rate because why get a 5 year arm when you could get the same rate on a 30 year fixed mortgage. The same can be said of the 1 year arm since it does not offer that much savings over the 30 year rate.

The 15 year rate fell this week and is now also sitting at the lowest point in 40 years with the exception of the first two weeks of 2009. I always like to translate mortgage rates into actual mortgage payments. Below are mortgage payments for a 200k loan based on today's rates and rates from a week and a month ago.

Feb 19
30-yr 1078.53
15-yr 1548.44
5-yr ARM 1078.53
1-yr ARM 1049.33

Feb 12
30-yr 1093.28
15-yr 1561.86
5-yr ARM 1101.93
1-yr ARM 1066.32

Jan 22
30-yr 1088.35
15-yr 1560.82
5-yr ARM 1103.16
1-yr ARM 1063.88

Messing around with our mortgage calculator I found something kind of interesting that illustrates the importance of mortgage rates on payments. If you got a 200k loan with a 30 year mortgage in 1995 the rate would have been around 9 percent and the mortgage payment would have been around $1625. Assuming you never refinanced you would pay off the loan in 2025.

Now if you got a 200k mortgage today you could get a 15 year mortgage with a 4.68 percent rate and pay only $1548.44. In addition, you would actually pay off the mortgage a year earlier in 2024.

So what is my advice in the current market? First I would avoid the 5 and 1 year arm. The rates are relatively high and it makes more sense to lock in with a long term rate when rates are at historic lows. Second I would look into getting a mortgage before spending too much time looking for a house. Basically although rates are low lenders are still pretty picky these days about finances. In addition, if there is anything weird with your credit score finding out early will allow you to have time to fix any outstanding issues.

So as far as the mortgage market what do we expect to happen over the next few weeks? Basically with the stock market hitting 6 year lows recently and hovering near 12 year lows and the bailout getting passed it seems that the market is going to be pretty volatile over the next few weeks. So I could see rates going up or down by possibly as much as half a point. If you have found a house you like it might make sense to lock in now but watch rates and try to relock if they fall significantly over the next week or two.

Ki maintains a website with information about Austin Tx real estate. It also has a free mortgage calculator along with updated graphs on mortgage interest rates.

Mortgage rates came down a little this week. We are still not back down to the levels we saw two weeks ago. 30 year rates fell from 5.25 to 5.16. This is a little higher than the 5.10 we saw two weeks ago and .2 points higher than the 4.96 we saw 4 weeks ago. But to put this all in perspective if we neglect the last month 5.16 is still one of the lowest rates we have seen in over 40 years.

One point of confusion is that when looking at average rates people relate it to a rate a friend or colleague got a few weeks ago. For instance if you had a friend that got a rate of 4.3 last week and see rates are at 5.16 you might think you really missed the boat. But 4.3 is lower than anything that has been officially published. Often these rates are down to paying more points to drive down the interest rate or they might be due to a special deal for instance a University offering professors a special rate. All this is to say if you have a friend that got a rate below 4.5 a few weeks ago don't fret you should be able to a similar rate today that is only slightly higher. Below are rates for the last few weeks. The rates on January 15th mark the lowest rates we have seen in 40 years and easily the lowest rates of the year.

Feb 12, 2009
30-yr 5.16 15-yr 4.81 5-yr ARM 5.23 1-yr ARM 4.94

Feb 05, 2009
30-yr 5.25 15-yr 4.92 5-yr ARM 5.26 1-yr ARM 4.92

Jan 29, 2009
30-yr 5.10 15-yr 4.80 5-yr ARM 5.27 1-yr ARM 4.90

Jan 22, 2009
30-yr 5.12 15-yr 4.80 5-yr ARM 5.24 1-yr ARM 4.92

Jan 15, 2009
30-yr 4.96 15-yr 4.65 5-yr ARM 5.25 1-yr ARM 4.89

Besides the drop in the 30 year rate we also saw a similar drop with the 15 year fixed rate. Both the 5 year arm and the 1 arm stayed mostly steady. Looking at rates is interesting but we like to translate it into mortgage payments. We took today's rates and translated them into a mortgage payment on a 200k loan. We did the same thing with rates from a week ago. We also looked at what the mortgage payment would be based on rates from January 15th (the lowest rates so far).

Feb 12
30-yr 1093.28
15-yr 1561.86
5-yr ARM 1101.93
1-yr ARM 1066.32

Feb 05
30-yr 1104.4
15-yr 1573.26
5-yr ARM 1105.64
1-yr ARM 1063.88

Jan 15
30-yr 1068.75
15-yr 1545.36
5-yr ARM 1104.4
1-yr ARM 1060.23

Looking at the 30 year rate we notice that while today's payment would be higher than what one would have paid based on January 15th rates its not that much higher. If we look back a few months ago to October 30th when rates were at 6.46 the potential payment on a 200k mortgage would be $1258.87. All this is to say that rates have come up recently but all in all they are still low to what we have seen over the last several years.


Ki writes regularly about mortgage rates and the mortgage industry. His site has a search for homes in the Austin MLS along with mortgage calculator widget.

After falling for the last 2 months 30 year mortgage rates jumped up this week. The 30 year mortgage went from 5.10 to 5.25. This is the highest we have seen December 11, 2008. The 15 year mortgage moved up as well from 4.80 to 4.92. Below are rates for the last few weeks.

Feb 05, 2008
30-yr 5.25 15-yr 4.92 5-yr ARM 5.26 1-yr ARM 4.92

Jan 29, 2008
30-yr 5.10 15-yr 4.80 5-yr ARM 5.27 1-yr ARM 4.90

Jan 22, 2008
30-yr 5.12 15-yr 4.80 5-yr ARM 5.24 1-yr ARM 4.92

Jan 15, 2008
30-yr 4.96 15-yr 4.65 5-yr ARM 5.25 1-yr ARM 4.89

Jan 08, 2008
30-yr 5.01 15-yr 4.62 5-yr ARM 5.49 1-yr ARM 4.95

The 5 year arm and the 1 year arm for the most part held steady. The 5 year arm still remains a pointless mortgage option since it is above the 30 year rate. The 1 year rate is moving back to almost being a viable option. While the difference between the 1 year arm and the 30 year fixed is still not great enough to see many people choosing the 1 year arm, if the 30 year rate rises more next week I could see the 1 year arm starting to see more activity. In addition to looking at rates we wanted to also look at actual mortgage payments. We took today's rates and determined what the mortgage payment would be on a 200k mortgage. We also did the same thing with rates from a week ago and rates from January 15th when rates hit their lowest point so far.

Feb 05
30-yr 1104.4
15-yr 1573.26
5-yr ARM 1105.64
1-yr ARM 1063.88

Jan 29
30-yr 1085.89
15-yr 1560.82
5-yr ARM 1106.88
1-yr ARM 1061.45

Jan 15
30-yr 1068.75
15-yr 1545.36
5-yr ARM 1104.4
1-yr ARM 1060.23

Compared to January 15th ones potential mortgage payment has risen about 3.2 percent. This is a decent rise for this short of a period of time.

So if you were planning on purchasing and didn't lock in 3 weeks ago did you miss the boat? I would say yes and no. The rates 3 weeks ago were at 30 year lows and they have risen quite a bit since then. But looking over the last several decades today's rates are still very very low.

It's hard to know what is going to happen moving forward. Without direct government involvement I don't see rates falling back to what we saw a few weeks ago. So that begs the question, are we ever going to see the proposed 4.5 government sponsored loan become a reality? The difficulty of passing the recent economic stimulus package makes it look like passing additional programs might be tough as well. And if it does pass there are probably going to be some strings attached. Currently I would peg the chance of it passing at around 50%. But if the housing market weakens this month I would think the prospects of a 4.5% government mortgage would rise substantially.


Ki writes regularly about mortgage rates. His site has free mortgage calculator along with general information about Austin Tx real estate.

Mortgage rates for the most part held steady this week. The 30 year rate dropped from 5.12 to 5.10. Rates are still at historic lows. The rates for the last month have all been below anything we have seen in the last 40 years since we started tracking weekly mortgage rates. The 15 year rate held steady at 4.8. The 5 year arm rose from 5.24 to 5.27 and the 1 year arm dropped from 4.92 to 4.90. What the numbers below don't reflect is that rates mid week were a little higher midweek. But by the end of the week they had fallen. Below are rates for the last few weeks.

Jan 29, 2008
30-yr 5.10 15-yr 4.80 5-yr ARM 5.27 1-yr ARM 4.90

Jan 22, 2008
30-yr 5.12 15-yr 4.80 5-yr ARM 5.24 1-yr ARM 4.92

Jan 15, 2008
30-yr 4.96 15-yr 4.65 5-yr ARM 5.25 1-yr ARM 4.89

Jan 08, 2008
30-yr 5.01 15-yr 4.62 5-yr ARM 5.49 1-yr ARM 4.95

Dec 31, 2008
30-yr 5.10 15-yr 4.83 5-yr ARM 5.57 1-yr ARM 4.85

If you are planning on putting 20% down the 5 year arm and the 1 year arm are pretty pointless. The 5 year arm is above the 30 year fixed rate. The 1 year arm is below the 30 year fixed but doesn't really offer enough savings to be worth the tradeoff of forgoing locking in at historic lows. We have seen a trend recently where on some properties banks are allowing borrowers to get 10 percent down for a 5 or 1 year arm but are requiring 20 percent for a 30 year loan. I am not sure why banks are favoring arm's since that is what got them into this mess. Ok so in addition to looking at rates lets look at mortgage payments. We looked at a mortgage payment based on today's rates for a 200k loan. We also did the same thing looking at rates from 2 weeks ago (which was all time low point for the 30 year fixed rate mortgage). We also looked at rates from 2 months ago.

Jan 29
30-yr 1085.89
15-yr 1560.82
5-yr ARM 1106.88
1-yr ARM 1061.45

Jan 15
30-yr 1068.75
15-yr 1545.36
5-yr ARM 1104.4
1-yr ARM 1060.23

November 20th
30-yr $1204.24
15-yr $1658.67
5-yr ARM $1182.43
1-yr ARM $1109.36

As we can see although a mortgage payment would have been a little less 2 weeks ago all in all rates and mortgage payments have not changed that much. But we are still seeing substantial savings from 2 months ago.

So what is our advice. It should be pretty obvious but with rates at all time lows the time to refinance is now. In addition, if you are currently thinking of getting a mortgage I would lock in an interest rate sooner rather than later.

In general there is still more of a risk of rates going up over the next month than down. Rates simply don't have that much room to fall. So most likely we should see rates hold even or rise over the next month. In addition, there is a risk that rates could rise rapidly over the next 6 months if the economy improves.

Ki writes regularly about mortgage rates. His site provides a search of the Austin MLS along with a free mortgage calculator

This is getting just ridiculous. This is now the 12th week in a row where mortgage rates have fallen. Ok one small caveat to that this is the 12th week where the 30 year mortgage rate has fallen. But in the current environment the 30 year mortgage rate is almost the only mortgage product that matters. The 30 year rate fell this week from 5.01 to 4.96. The 5 year arm fell (from 5.49 to 5.25) and the 1 year arm declined slightly (from 4.95 to 4.89). But frankly who cares, as long as these rates stay above the 30 year mortgage (i.e. the 5 year arm) or just slightly below the 30 year mortgage (the 1 year arm) there is no real reason to consider these mortgage products. Rates for a 15 year mortgage rose slightly from 4.62 to 4.65. Below are rates for the last few weeks.

Jan 15, 2008
30-yr 4.96 15-yr 4.65 5-yr ARM 5.25 1-yr ARM 4.89

Jan 08, 2008
30-yr 5.01 15-yr 4.62 5-yr ARM 5.49 1-yr ARM 4.95

Dec 31, 2008
30-yr 5.10 15-yr 4.83 5-yr ARM 5.57 1-yr ARM 4.85

Dec 24, 2008
30-yr 5.14 15-yr 4.91 5-yr ARM 5.49 1-yr ARM 4.95

Dec 18, 2008
30-yr 5.19 15-yr 4.92 5-yr ARM 5.60 1-yr ARM 4.94

So I wanted to look at actual mortgage payments in addition to mortgage rates. When we talk of rates dropping sometimes its interesting to translate those rate drops into real dollars. We translated today's rates into a mortgage payment for a 200k loan. We also looked at rates from two weeks ago and rates from October 30th (this was the date when rates first started to fall).

Jan 15
30-yr $1068.75
15-yr $1545.36
5-yr ARM $1104.4
1-yr ARM $1060.23

Dec 31
30-yr $1085.89
15-yr $1563.93
5-yr ARM $1144.37
1-yr ARM $1055.38

Oct 30th
30-yr $1258.87
15-yr $1708.31
5-yr ARM $1245.77
1-yr ARM $1120.56

So if we look at what mortgage payments would be today compared to October 30th is fairly apparent that rates and correspondingly mortgage payments have plummeted. For a 30 year mortgage on a 200k loan the payment has come down from $1258.87 to $1068.75. That is a drop of $190.12 or 15.1%. That is a pretty huge drop in a few months.

So what is going to happen moving forward. Rates can obviously not continue to go down week after week. At this point I think there is a bigger risk of rates going up than going down. I would be surprised if rates continue to go down for 3 or 4 more weeks. In the next few months I would expect rates to continue to hover around 5 percent plus or minus half a point. Basically the government is going to do whatever possible to keep rates low. In the next two or three years its expected interest rates will rise dramatically. All the money that has been pushed into the economy will at some point increase inflation and this will in turn push up mortgage rates.


Ki writes regularly about mortgage rates and the mortgage industry. His site has a search of the Austin MLS along with a mortgage calculator widget

So rates fell slightly this week. This marks the 10th week in a row rates have fallen. This is also the 3rd week where the the 30 year mortgage rate (the most popular mortgage product) has hit new 30 year lows. The 30 year rate fell from 5.14 to 5.10. The 5 year arm rose from 5.49 to 5.57. As long as the 5 year rate is higher than the 30 year arm it doesnt really matter if it rises or falls because no one is using it. The 1 year arm fell from 4.95 to 4.85 and the 15 year arm fell from 4.91 to 4.83. Even though these rates fell more than the 30 year rate these mortgage rates are still pretty pointless. As long as the 30 year rate is this low it really makes more sense to lock into this rate for the long term.


Dec 31, 2008
30-yr 5.10 15-yr 4.83 5-yr ARM 5.57 1-yr ARM 4.85

Dec 24, 2008
30-yr 5.14 15-yr 4.91 5-yr ARM 5.49 1-yr ARM 4.95

Dec 18, 2008
30-yr 5.19 15-yr 4.92 5-yr ARM 5.60 1-yr ARM 4.94

Dec 11, 2008
30-yr 5.47 15-yr 5.20 5-yr ARM 5.82 1-yr ARM 5.09

Dec 04, 2008
30-yr 5.53 15-yr 5.33 5-yr ARM 5.77 1-yr ARM 5.02

So lets take rates and translate them into a mortgage payment. We ran the current rates on a 200k mortgage. Then we looked at rates from last week and from a October 30th when rates first started their historic fall.

Dec 31
30-yr 1085.89
15-yr 1563.93
5-yr ARM 1144.37
1-yr ARM 1055.38

Dec 24
30-yr 1090.82
15-yr 1572.22
5-yr ARM 1134.32
1-yr ARM 1067.53

October 30th
30-yr $1258.87
15-yr $1708.31
5-yr ARM $1245.77
1-yr ARM $1120.56

So the savings from last week are not that impressive. But compared to October 30th we are seeing much lower payments. Here are the savings for the different rates compared to October 30th.

Rate Dollar Amount Saved
30 yr $172.98
15-yr $144.38
5-yr ARM $101.4
1-yr ARM $65.18

Rate Percent Drop in Mortgage Payment
30 yr 13.74%
15-yr 8.45%
5-yr ARM 8.14%
1-yr ARM 5.82%

The most interesting number to me is 13.74% the percent drop for the 30 year rate in the last 2 months. That is pretty significant.

So what is going to happen moving forward. I actually think rates are headed higher over the next two years. They might decrease a little more over the next few months. The government has a pending plan to offer mortgage rates at 4.5 percent for home buyers. But the way things are headed it would be interesting if mortgage rates fell below 4.5 percent making the governments plan somewhat pointless.

But once the economy recovers most signs point toward massive inflation. Why? The Fed has been pouring billions into the economy to stop the economy from falling apart further. This would usually cause inflation except for the fact that the economy is so sluggish. But once the economy recovers the massive amounts of cash the government has pushed into the economy should cause high levels of inflation. This will most likely lead to double digit interest rates. Some thing rates will get up to 15%. So our currently historically low interest rates might be followed by historically high interest rates.


Ki writes regularly about mortgage rates. His site has a search of the Austin MLS along with a free mortgage calculator.

Mortgage Rates fell again this week. This is the ninth week in a row were rates have fallen. Last week mortgage rates were already at 50 year lows. The 30 Year mortgage rate fell from 5.19 to 5.14. This is not a huge fall. The significant point this week is that they basically stayed down at historically low levels. Here are the lowest points mortgage rates have seen for the last 30 years. 1) December 2008 5.14 2) June 2003 5.23 3) March 2004 5.45 4) May 2003 5.48 Although rates are lower than they were in 2003 and 2004 the mortgage market today is trickier. In 2003 and 2004 virtually anyone could get a decent rate. Today banks are looking closely at credit scores. In addition banks have almost no interest in giving out loans to people wanting to purchase multifamily properties. Below are rates for the last few weeks. December 24, 2008 30-yr 5.14 15-yr 4.91 5-yr ARM 5.49 1-yr ARM 4.95 December 18, 2008 30-yr 5.19 15-yr 4.92 5-yr ARM 5.60 1-yr ARM 4.94 December 11, 2008 30-yr 5.47 15-yr 5.20 5-yr ARM 5.82 1-yr ARM 5.09 December 4, 2008 30-yr 5.53 15-yr 5.33 5-yr ARM 5.77 1-yr ARM 5.02 November 26, 2008 30-yr 5.97 15-yr 5.74 5-yr ARM 5.86 1-yr ARM 5.18 While the 30 year rate and the 15 year rates have fallen we have not seen nearly as much movement in the 5 and 1 year ARM. So in addition to mortgage rates it's interesting to look at what the actual payments would be on a loan. Using our free mortgage calculator we ran the numbers on today's rates for a 200k loan. We also ran the numbers for last weeks rates and rates from October 30th. The reason we choose October 30th was because that was when we began the 9 weeks of falling rates. December 24th 30-yr $1090.82 15-yr $1572.22 5-yr ARM $1134.32 1-yr ARM $1067.53 December 18th 30-yr $1096.98 15-yr $1573.26 5-yr ARM $1148.15 1-yr ARM $1066.32 October 30th 30-yr $1258.87 15-yr $1708.31 5-yr ARM $1245.77 1-yr ARM $1120.56 Compared to last week the payment for a 30 year loan only fell a few dollars going from 1096.98 to 1090.98. On the other hand if we look back to October 30th the payment has fallen from $1258.87 to $1090.82. This is a drop of about 13.4 percent. If we also consider that prices in most areas have fallen over the same period of time this is pretty substantial savings. There is still no reason to look at Arms. The 5 year ARM still has rates above the 30 year mortgage which makes this product basically pointless. The 1 Year Arm is lower than the 30 Year rate but it's basically pointless for 2 reasons. First the difference is pretty small this week it was only .19 points. Second since 30 year rates are historical lows the small savings hardly seem worth losing the chance to lock in at historical lows. So what is going to happen with rates moving forward? I think rates are going to hold even or fall a little more over the next month. After that expectations are that rates are going to increase slightly. Once the economy recovers the massive amounts of money the Fed have pushed into the economy should lead to inflation which could push mortgage rates up to 12 or 13 percent. All that is to say over the next few months we might see the lowest rates we are going to see for the next few decades.

Mortgage rates are down to rates we have no seen in 50 years. Since the early 1970s when we have good data for mortgage rates these are the lowest rates we have seen.

1) December 2008 5.19
2) June 2003 5.23
3) March 2004 5.45
4) May 2003 5.48

Before this rates were at current levels in the late 1950s. Here are rates for the last few weeks.

December 18, 2008
30-yr 5.19 15-yr 4.92 5-yr ARM 5.60 1-yr ARM 4.94

December 11, 2008
30-yr 5.47 15-yr 5.20 5-yr ARM 5.82 1-yr ARM 5.09

December 4, 2008
30-yr 5.53 15-yr 5.33 5-yr ARM 5.77 1-yr ARM 5.02

November 26, 2008
30-yr 5.97 15-yr 5.74 5-yr ARM 5.86 1-yr ARM 5.18

November 20, 2008
30-yr 6.04 15-yr 5.73 5-yr ARM 5.87 1-yr ARM 5.29

A few things to point out, first Arms are still basically pointless. The 5 Year Arm is at 5.6 which is well above the 5.19 offered for a 30 year rate. With 1 Year Arms (at 4.94) and 15 year fixed (at 4.92) offering little savings the 30 year mortgage is pretty much king. There is almost no reason in this market to consider other mortgage products.

I want to be clear about a few things. First although rates are low they are not universally available. In 2002/2003 when rates where low they were available to everyone and they were available for people interested in single family homes as well as investors. Today low interest rates are pretty much only available to people that want to buy single family homes to live in. Investors who plan to rent out properties will receive much high rates. Also loans are really only available to people that can document their income. The limited availability of current rates is one of the reasons that the low rates are not doing more to help the current problems in the market.

So in addition to looking at rates lets look at actual payments. Using our mortgage calculator widget lets take today's rates and translate them into a payment on a 200k loan. To add some perspective we did the same thing using mortgage rates from a week ago and rates from the end of October.

December 18th
30-yr $1096.98
15-yr $1573.26
5-yr ARM $1148.15
1-yr ARM $1066.32

December 11th
30-yr $1131.81
15-yr $1602.50
5-yr ARM $1176.05
1-yr ARM $1084.67

October 30th
30-yr $1258.87
15-yr $1708.31
5-yr ARM $1245.77
1-yr ARM $1120.56

Looking at October 30th we see pretty substantial savings. For a 200k loan the payment would be $161.89 less a month or 14.7 percent less. Arms and 15 year rates are down as well but in the current market these products are pretty much pointless. Basically it's not worth saving a few dollars a month to get a 1 Year ARM and not getting a 30 year rate at historical lows.

So what are rates going to do moving forward? There is talk of the FED having a 4.5% mortgage for new home buyers. It's hard to know if this will end up happening. My advice for people thinking of refinancing is to do so now. Most of the talk I have seen is the 4.5% rate will only apply to new purchases and will not be available for people looking to refinance.

For new buyers it's a little tougher. Personally I think it's not worth it to wait and risk rates jumping up. If rates were at 5.7 it might be worth it to wait for the 4.5 rate. Bu with people getting mortgages near 5 I don't think it's worth it to wait for the government to pass legislation. Partly because even if the legislation is passed the 4.5 rate could have several strings attached.

So what is going to happen with rates next week? I don't know if they are going to go up or down but I think there is still a lot of volatility in the market. So I would not be surprised by a large jump up or down with rates similar to what we have been seeing for the last several weeks.

Ki writes regularly about the real estate market. His site has a search of the Austin MLS as well as a mortgage rates widget and mortgage calculator html for webmasters.

The Fed cut the fed funds rate at the end of October. The rate was dropped from 1.5% to 1%. This is the lowest the rate has been since 2003. Following the cut we saw drops in all the major mortgage products. The 30 year dropped from 6.46 to 6.2. The largest drop was in the 15 year mortgage which fell from 6.19 to 5.88 a drop of .31 points. 5 year arms and 1 years also fell .17 and .13 respectively. Below are mortgage rates for the last several weeks.

November 6, 2008
30-yr 6.20 15-yr 5.88 5-yr ARM 6.19 1-yr ARM 5.25

October 30, 2008
30-yr 6.46 15-yr 6.19 5-yr ARM 6.36 1-yr ARM 5.38

October 23, 2008
30-yr 6.04 15-yr 5.72 5-yr ARM 6.06 1-yr ARM 5.23

October 16, 2008
30-yr 6.46 15-yr 6.14 5-yr ARM 6.14 1-yr ARM 5.16

As we can see from the numbers rates have been moving back and forth over the last few weeks pushed around by different bits of economic news coming out. And this week of course by the recent cuts by the fed. Let's look at what a mortgage would be this week on a 200k loan based on current rates. We also looked at what the mortgage would be for a 200k loan based on last weeks rates.

November 6th
30-yr $1224.92
15-yr $1674.77
5-yr ARM $1223.64
1-yr ARM $1104.40

October 30th
30-yr 1258.87
15-yr 1708.31
5-yr ARM 1245.77
1-yr ARM 1120.56

So first off my advice would be to avoid the 5 year arm. Since the mortgage is so close to what you would be paying on a 30 year fixed mortgage their is almost no reason to consider a 5 year arm. I would also probably avoid a 1 year arm. With mortgage rates acting so wildly its pretty likely rates could be much higher a year from now. If you get a 30 year fixed and rates drop substantially you can also refinance at the new lower rate. If you get a 1 year arm and rates increase there is not much you can do but simply make higher payments.

So what is going to happen moving forward. I have heard some speculation that rates are going to increase this month. I don't know if rates will be higher a month from now but I think rates will continue to see the atypical large weekly fluctuations we have seen the last few weeks.

There has also been some speculation that the fed will raise rates if the market starts to improve. I don't think this is a foregone conclusion. If the economy starts to improve I don't think the government will move quickly to raise rates. Basically the financial crisis has been so severe that if we start to move beyond it politicians will be worried of raising rates too quickly will botch a potential recovery. Or if the recovery fails for other reasons they will be blamed anyway. Therefore I think priority number 1 over the next year will remain the real estate and mortgage markets and that translates to keeping the fed rate low. Of course keeping the fed rate low does not guarantee that mortgage rates will stay low.

Ki is a realtor in Austin Texas. He writes regularly about mortgage interest rates. His site offers free mortgage calculator html for webmasters and a widget that shows current mortgage rates

This marks the third week in a row that mortgage rates have moved in one direction or another by more than .4 points. This is highly unusual. For some perspective for the 12 weeks from March 20th to June 5 mortgage rates held steady between 5.85 and 6.09. At this point mortgage rates are highly highly volatile. Here are mortgage interest rates for the last 4 weeks.

October 30, 2008
30-yr 6.46 15-yr 6.19 5-yr ARM 6.36 1-yr ARM 5.38

October 23, 2008
30-yr 6.04 15-yr 5.72 5-yr ARM 6.06 1-yr ARM 5.23

October 16, 2008
30-yr 6.46 15-yr 6.14 5-yr ARM 6.14 1-yr ARM 5.16

October 9, 2008
30-yr 5.94 15-yr 5.63 5-yr ARM 5.90 1-yr ARM 5.15

October 2, 2008
30-yr 6.10 15-yr 5.78 5-yr ARM 6.00 1-yr ARM 5.12

30 Year rates have been a little more volatile than the 15 year fixed and 5 year arm products. The one mortgage product that stands out is the 1 Year ARM. It has for the most part been steadily rising over the last few weeks.

So what is going on with mortgage rates? Basically there are a number of strong forces pushing around mortgage rates like a wild hurricane. Over the last few weeks we have seen similar erratic swings with the stock market with both historic rises and drops happening several times in the last week. Add to the uncertainty in the economy with massive government bailout programs (the Fannie Mae takeover and the 700 billion bailout) we can begin to see that the erratic movement in mortgage rates is simply a reflection of a highly erratic time period in the general economy.

Ok let's look at what your payment would be on a 200k mortgage. Using our mortgage calculator we ran the numbers based on today's mortgage rates. We also ran the numbers based on mortgage rates from last week.

October 30th
30-yr 1258.87
15-yr 1708.31
5-yr ARM 1245.77
1-yr ARM 1120.56

October 23rd
30-yr 1204.24
15-yr 1657.60
5-yr ARM 1206.82
1-yr ARM 1101.93

It's hard to tell what rates are going to do moving forward. But it looks like rates will continue to remain volatile. What we are seeing is basically a tug of war between the government and the economy. The government is doing whatever it can to push down rates through takeovers, bailouts and lowering the fed rate. Negative factors that come up in the economy tend to push rates up because it causes banks to not want to lend out money. I think we will continue to see this tug of war for the next few weeks. Add a presidential election throw in for good measure and I expect to see mortgage rate volatility to continue. That said overall I expect mortgage rates to go down over the next month. The government shows no signs of letting up and I think they will win the tug of war in the long term.

What recommendations do I have for people looking for a loan? I hate recommending arms. If people are looking at the buying for a long term (single family home owners) I would advise to avoid arms. If investors are planning on being in a property for a short period of time and have the cash reserves to deal with random changes in mortgage payments the 1 year is attractive because the difference between 30 year and 1 year arms is greater than what we typically see.

Ki lives in Austin are writes about trends with mortgage rates. His site provides a free mortgage calculator and a graph of historical mortgage interest rates.

The general arguments concerning the bailout have gone something along the lines of

"The taxpayers should not have to foot a 700 billion dollar bill to bail out Wall Street"

"But if taxpayers do not bail out Wall Street the economy will fall apart and those same taxpayers will be hurt"

If we could be sure the bailout would work the second argument has some merit. While the bailout will certainly help the banks, the problem is we have almost no guarantee the bailout will help the real estate market and the general economy.

First let's look at some recent history of how the Fed has tried to help the troubled real estate market. The Fed usually attempts to lower mortgage interest rates to help the real estate market. By lower mortgage rates houses become more attractive. In addition, with lower mortgage rates home buyers can buy more expensive houses with the same monthly payment. Therefore lower rates can help stop falling prices. So it was not surprising in early 2008 the Fed cut the Fed rate. In normal markets lowering the Fed rate helps banks and causes them to lower mortgage interest rates. And after the fed cuts mortgage rates for a period of time dropped to 5.50. If they had stayed down there we might have averted some of the problems with the current housing crisis. But instead a few weeks later rates had jumped backed up to 6.2. Basically banks said thanks for the lower fed rates but we are not going to alter our rates. In fact, over the next few months mortgage rates rose all the way to 6.6. The next big move was acquiring Freddie Mac and Fannie Mae. This was one of the largest government takeovers in US history. The move was risky because the government was providing insurance for trillions in loans. And it initially had a positive effect on the housing market. But a few weeks later AIG ran into financial problems. It was almost as if the government takeover of Freddie Mac and Fannie Mae never happened.

So the previous moves the federal government has made to stop the financial crisis have not worked. Should the 700 billion dollar bailout be different? It could certainly help the markets. But it might not. Lets look at why.

One of the benefits of the 700 billion dollar bailout has nothing to do with banks. It has more to do with perception on Main Street. The hope is that the bailout will restore confidence in the real estate market on Main Street.

In politics people often talk about news cycles covering up the last news cycle. Basically the last piece of news stays in people's minds until the next piece of news comes along. The Fannie Mae and Freddie Mac news cycle (and the billions the government will spend on it) only lasted until the next piece of news, which was about a week. While the 700 billion dollar bailout should restore some confidence into the real estate market, that confidence might only last until the next piece of news. And with things happening so quickly that news cycle might not last very long and given the current market the next piece of new is likely to be negative.

The other benefit of the 700 billion dollar bailout is that the government is hoping to influence banks to start lending again. The idea is that by taking billions in toxic loans off the books for banks they will start lending again. The problem is that their is no guarantee this will happen. In fact when the fed lowered rates banks said thanks but decided that prospects for the housing market looked negative and continued to add restrictions to lending. In a similar fashion banks could say thanks for the 700 billion but we continue to see negative prospects in the housing market and therefore we will continue to have strict lending practices. But thanks for the 700 billion taxpayers.

Escapeso real estate is a small brokerage in Austin Texas. Their realtors works with clients looking for Austin real estate. Their site offers a free search of the Austin MLS along with current mortgage interest rates.

So it has been a week since the feds came in and took over Freddie Mac and Fannie Mae. While it will obviously take some time to know the long term repercussions I wanted to look at some of the immediate reactions to the move.

First let's look at the reaction from the media and the general public. One would expect there to be some political fallout from the largest takeover in government history. But because of the election and Hurricane Ike the reactions have largely been muted. There have been of course the expected positive reactions that this was a shrewd move to help the real estate market and negative reactions that the government should limit its involvement. But for the most part their has not been a big reaction one way or another. I have actually seen more stories about the reactions on the takeover from the presidential candidates than stories simply about the takeover.

While the media reaction has been muted the reactions in the financial markets have not been. Not surprisingly, the stocks of Fannie Mae and Freddie Mac plummeted after the announcement. The government said before hand that the common shares of Freddie Mac and Fannie Mae would lose most of their value in the event of a government takeover. So following the news of the takeover the share promptly lost 80% of their value.

The mortgage markets have reacted very favorably to the news. Considering the Fed has cut interest rates multiple times this year mortgage interest rates have remained relatively high. The reason for this was that banks were unsure about the financial stability of Freddie Mac and Fannie Mae which provides insurance for about half of the residential loans issued in the United States. This risk has now been lowered since the government takeover. Consequently mortgage rates have plummeted in the last week. 30 Year mortgages have dropped from 6.35 to 5.93. This is after rates have moved down from 6.63 to 6.35 partially on expectations that Fannie Mae and Freddie Mac were going to be taken over. I have seen some reports that this is lowest rates have been in the last 4 months. I think this understates how low rates have come down. Besides two brief drops at the beginning of 2008 this is the lowest rates have been since 2005.

The lower interest rates should have a positive effect on the real estate market. Lower rates pull down the mortgage on a house and tend to have a positive effect on real estate values and market activity. In another positive sign although their has not been too much media coverage the coverage that has come out has been mostly positive. To be honest I was a little surprised by this. I would have expected the coverage to be a little more mixed. But regardless the favorable media reaction combined with lower interest rates should help the real estate market. And based on what I have heard from different realtors their does seem to be an upswing in activity. But we won't have any hard data on this for a month or so.

So, at least in the short term, it seems the Feds have accomplished their goals of helping the real estate market with the Freddie Mac and Fannie Mae takeover. We will of course have to wait over the next few years to see if this move turns out to be wise. But for now the Fed has finally been able to push down mortgage rates.

Ki is a real estate broker working in the Austin real estate market. He maintains a website with a Austin MLS search and a frequently updated Austin real estate blog.

So on Friday it was leaked that the government is taking over Freddie Mac and Fannie Mae. On Sunday it was official. Freddie Mac and Fannie Mae have now been taken over by the federal government. But what does it mean for the real estate market, mortgage interest rates, and the US economy.

First let's look at what it means for mortgage rates. I would expect that the government takeover will result in lower mortgage rates, possibly a full point lower. Why? Basically the Fed has been struggling to lower mortgage rates for the last year in an attempt to assist the troubled real estate market. The Fed has lowered prime rates several times in an attempt to pull down mortgage interest rates, with mixed success. Now with full control of Freddie Mac and Fannie Mae (which provides insurance for most mortgages in the US) they will have much more control over the mortgage market and mortgage rates. As long as their objective stays the same, we can expect lower rates.

What does the takeover say about the current situation in the real estate market? This should have been obvious from all the events that preceded this but the takeover shows that the real estate market is in serious serious trouble. The federal government doesn't just take over large companies on a whim, especially an administration with a Republican president that believes strongly in free markets. This is not simply a government takeover. This is the largest takeover in US history. Basically the takeover happened because it was believed if nothing was done we were headed for economic catastrophe.

How is this going to effect the real estate market? Although the takeover is a bad sign about our current situation it should have a positive effect on the real estate markets moving forward. First lowering mortgage interest rates should be quite a boon for the real estate market. Lowering rates lowers the effective cost of a house. And historically lowering rates has a positive effect on real estate values.

Additionally, if the Fed is smart they will reduce some of the mortgage restrictions Freddie Mac and Fannie Mae have created in the last year. While I would not like to see the mortgage market return to the free-wheeling lending of a few years ago, some of the current rules are bizarrely restrictive. The lending environment typically works like a pendulum moving from one extreme to another. Currently lending restrictions are not just stricter than what we saw during the real estate boom a few years ago but they are more restrictive than anything we have seen in the last 15 - 20 years. Hopefully a federally controlled Fannie Mae and Freddie Mac can help return us to normal as far as lending restrictions.

Lastly the government takeover could put taxpayers in the lurch for billions in loan losses. In the short term the government is going to have to infuse money into Freddie Mac and Fannie Mae. They have been losing money for quite some time and that is not going to change overnight. If the market improves over the next year or two, which was likely before, and the takeover improves the outlook for the real estate market, the government will have to infuse maybe a total of 20 to 30 billion into Fannie Mae and Freddie Mac to get them back to financial solvency. That sounds like a lot but to put the number in context, the cost of the Iraq War has been running at about 100 billion a year for the last 7 years. So a 20 billion dollar expense is an unpleasant but manageable expense. But if real estate market gets a lot worse over the next two years, I can't think of the adjective to describe how expensive things could get.

Fannie Mae and Freddie Mac provide insurance for 5 trillion in loans or about half of the residential loans in the United States. Because of the takeover, the federal government now provides insurance for 5 trillion in loans. If we are just on the cusp of severe real estate problem that means that the federal government is on the hook for 5 trillion in loans. That's more than double the entire federal budget for 2007 and 10 times what the US has spent on the Iraq War. So as taxpayers we should hope things improve soon because if the rate of foreclosures skyrockets over the next 2 or 3 years, we are basically going to be paying for it.

Does this mean the federal government is insane? It depends on how you look at the issue. This was certainly a risky move. But on the other hand allowing Fannie Mae and Freddie Mac to fail would have devastated the US economy and likely lead to a severe depression. So doing nothing was equally risky. And while taking over Freddie Mac and Fannie Mae was a risky move for taxpayers, in a depression those that keep their jobs have to make up for all the lost tax revenues for the large number of people that lose their jobs. So in summary the federal government found itself in a tight spot and decided to bet the farm they can fix the real estate market and for our sakes, let's hope they are right.

Ki lives and works in central Texas. He provides a search of the Austin MLS on his site along with current information on the Austin real estate market. His site also provides a tool that show current trends for mortgage interest rates.

Mortgage interest rates moved down again this week. This marks the fifth week in a row where 30 Year mortgage rates have either fallen or held steady. This is of course good news for people looking to buy a house. This is also good news for the real estate market. A few weeks ago a weakened real estate market was dealing with additional burden of some of the highest mortgage rates we have seen in a year [mortgage rates graph]. Below are the mortgage rates for the major mortgage products for the last few months. As we can see while the 30 Year rate has fallen both the 5 year and the 1 year arm have for the most part held steady. This brings the difference between the 30 Year rate and the 5 year and 1 year arm back to roughly normal levels. The 15 year mortgage rate has been falling as well over the last month but not as much as the 30 year rate.

August 28,2008
30-yr 6.40 15-yr 5.93 5-yr ARM 6.03 1-yr ARM 5.33

August 21,2008
30-yr 6.47 15-yr 6.00 5-yr ARM 5.99 1-yr ARM 5.29

August 14,2008
30-yr 6.52 15-yr 6.07 5-yr ARM 6.02 1-yr ARM 5.18

August 7,2008
30-yr 6.52 15-yr 6.10 5-yr ARM 6.05 1-yr ARM 5.22

July 31,2008
30-yr 6.52 15-yr 6.07 5-yr ARM 6.07 1-yr ARM 5.27

While 30 mortgage rates have fallen they are still above what we saw a few months ago when mortgage rates where hovering around 6.0. So while mortgage rates are relatively high I still think this is a pretty good sign. Why? Basically mortgage rates have fallen in spite of the fact that recently the FED has decided not to lower rates. Does this mean that banks are feeling better about handing out mortgages? I would not go that far. If anything I would think that rates rose suddenly a month ago and simply overshot. And now they are simply reacting to that original large increase by moving down a bit. So let's look at what the mortgage rates mean for an actual mortgage. Using our mortgage calculator let's run through the numbers based on a 200k mortgage. We looked at what a mortgage would be this week plus a week and a month ago.

August 28th
30-yr $1251.01
15-yr $1680.15
5-yr ARM $1202.96
1-yr ARM $1114.33

August 21st
30-yr $1260.19
15-yr $1687.71
5-yr ARM $1197.81
1-yr ARM $1109.36

July 24th
30-yr $1281.28
15-yr $1707.22
5-yr ARM $1219.75
1-yr ARM $1134.32
So what is going to happen over the next few months? It's always hard to predict but here is my guess. I think rates will hold steady or fall a bit over the next two months. I am expecting rates to come down a bit after the election. Of course a lot could happen between now and then. If the market runs into more problems I would expect rates to increase. Why? The Fed has their hands tied behind the back they cannot lower the Fed rate too many more times.

Escapeso Austin Real Estate provides information on mortgage rates. They have a graph of historical mortgage rates along with a free mortgage calculator and a mortgage interest rates widget.

Mortgage Interest Rates Mortgage Rates Widget

Mortgage interest rates moved down slightly this week. This was a good sign since it was not preceded by any rate cuts from the FED. The 30 year mortgage rate fell from 6.52 to 6.47 and the 15 year mortgage rate fell from 6.07 to 6.00. For arms the 5 year rate fell from 6.02 to 5.99. The 1 year arm was the only one of the 4 rates to increase going from 5.18 to 5.29. If anything the mortgage rates are not more in align with each other. Over the past few weeks the difference between the 1 year arm and the other rates has seemed larger than normal.

To put this weeks changes in context of what has happened over this summer mortgage rates are still quite a bit higher than earlier. For the 30 Year mortgage on May 22 rates fell to 5.98. Then by July 24 rates raised to 6.63. So rates have fallen since then but we are still quite a bit higher than the rates we saw in May. Below are mortgage rates for the last few weeks.

August 21,2008
30-yr 6.47 15-yr 6.00 5-yr ARM 5.99 1-yr ARM 5.29

August 14,2008
30-yr 6.52 15-yr 6.07 5-yr ARM 6.02 1-yr ARM 5.18

August 7,2008
30-yr 6.52 15-yr 6.1 5-yr ARM 6.05 1-yr ARM 5.22

July 31,2008
30-yr 6.52 15-yr 6.07 5-yr ARM 6.07 1-yr ARM 5.27

July 24,2008
30-yr 6.63 15-yr 6.18 5-yr ARM 6.16 1-yr ARM 5.49

So let's see what these mortgage rates would mean for an actual mortgage payment. We ran today's mortgage rates through our free mortgage calculator for a 200k loan. We also looked at what the payments would have been on the same mortgage a week and a month ago.

August 21st
30-yr $1260.19
15-yr $1687.71
5-yr ARM $1197.81
1-yr ARM $1109.36

August 14th
30-yr $1266.76
15-yr $1695.28
5-yr ARM $1201.67
1-yr ARM $1095.75

July 24th
30-yr $1281.28
15-yr $1707.22
5-yr ARM $1219.75
1-yr ARM $1134.32

So what else is going on in the mortgage industry. First it looks like the government might take over Freddie Mac and Fannie Mae. A few months ago it was made clear that Freddie Mac and Fannie Mae would be protected while other smaller banks would be allowed to fail. Now with Freddie and Fannie running into serious financial problems (Freddie Mac stock has sank from 65.88 to 4.75). Oddly enough one of the problems Freddie Mac faces is that because the US government has made it clear Freddie Mac is too large to fall, investors are hesitant to give funds to Freddie Mac under the assumption that their investment will not be repaid following a government takeover.

So what will happen following the government takeover of Freddie Mac. Personally I think it will be positive. Over the last several months Freddie Mac has created a pretty large list of loans they will not provide backing for. This has hurt the ability of people to get loans and in turn has been one of the negative factors dragging down the national real estate market. If the government takes over Freddie Mac a lot of these restrictions will probably be pulled back. So while it won't magically cure all the problems with the national real estate market it will alleviate at least one of the negative factors weighting it down.

Ki works as a realtor in the central Austin real estate market. His site provides a search of the Austin MLS and a free mortgage calculator along with general information for buyers about Austin real estate.