If you're obtaining a mortgage and contemplating whether to get a traditional home loan or adjustable rate mortgage (ARM), there are definitely some things you'll want to consider.

Before deciding on either, you'll want to understand the dynamics and look into the advantages and disadvantages of each. Some considerations to keep in mind are how long you intend on keeping the home; whether one of your intentions in buying a home is to build credit and what will give you the best annual percentage rate (APR) in the beginning and throughout the lifetime of the loan.

Traditional home loans are typically known as fixed rate mortgages (FRMs). The most popular FRM, a longer term mortgage, has the following characteristics:

* Payments are fixed throughout the term of the loan
* Are available from 15 to 40 years, in 5 year increments
* The shorter the loan term, the lower the interest rate
* The shorter the loan term, the less interest you will pay over the life of the loan
* The bulk of loan payments go to interest in the beginning of the loan
* There are penalties for early payoff on some FRMs - ask your lender

Included in FRMs is the balloon loan, a short-term, fixed-rate mortgage. The balloon loan has some advantages in that the interest is typically much lower and you have lower monthly payments than on a 15- to 40-year term loan. The terms are usually from 3 to 7 years, but you are required to pay the remaining balance in full at the end of the term.

If you are considering a balloon loan and think you will be keeping the home for a long period of time, obtain one with a refinancing option. Certain conditions will have to be met, but it allows you to convert the remaining balance of the loan into a longer fixed-rate mortgage at the end of the term without going through the buying process again.

With the caveat of the refinancing option, you don't have to go through another credit check or reapproval of the property. The interest assigned to the new loan will be at the current market rate at the time it is converted. A processing fee may be required when obtaining the new loan. You'll want to ask about this long before you agree to the balloon loan.

ARMs, on the other hand, provide you with a broad array of options, advantages and disadvantages. Similar to a balloon loan, the payments and interest rate are typically lower in the beginning of the ARM term. Periodic assessments are made throughout the lifetime of the loan, which can lower or raise your interest rate and monthly payment.

Keep in mind, interest rates typically are higher at the first assessment of the loan and often continue to rise. These kinds of loans, however, commonly have caps that put a ceiling on your maximum monthly payment that can be required of you throughout the lifetime of the loan. The excess will simply be added to the principal of your loan, which could extend the lifetime of your loan.

ARMs option ARMs are also available, can be very complex loans, so you'll want to understand the conditions of the loan, along with terminology applicable to the loan. Ask your lender prior to committing to an ARM about the advantages and disadvantages.

Generally, ARMS are best suited for those who are making an investment where rents are low and property values are high. This option allows you more cash flow. They also often benefit seasonal workers and those who own businesses where the revenues fluctuate.

Keep in mind, the interest rate on an ARM can adjust as soon as one month from the loan's inception, depending on the conditions of the loan. Some terminology to ask about and pay close attention to is:

* Lifetime cap limit
* Index
* Margin
* Periodic or adjustment cap limit
* Interest rate cap
* Loan recast
* Minimum payment factor

General advantages from a traditional mortgage are that you have significantly more flexible payment options and your monthly payments at the onset of your loan are much lower. One disadvantage is that if you only pay the minimum payment due monthly, your loan will recast at some point and your lender will recalculate your loan payments over the next 30 years based on your remaining balance. This could drastically raise your monthly loan payment.

Again, ask your lender as many questions as you can think of. Compare terms, advantages and disadvantages of each. Make sure you understand the terminology used and conditions prior to agreeing and signing to any loan.

Ki lives and works as a realtor in the Austin real estate market. There is comprehensive Austin home search on his website. His website also has detailed information on Austin real estate and a mortgage calculator widget.

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

There were some expectations that mortgage rates would fall this week. Instead rates not only did not rise but fell slightly this week. The 30 year rate fell from 5.08 to 5.07 hitting a new low for the summer. The 15 year rate fell from 4.54 to 4.50. The 5 year arm fell from 4.59 to 4.51 while the 1 year arm rose slightly from 4.62 to 4.64.

The continuing fall of the 30 year rate is good news for the national real estate market which is in the midst of a lukewarm recovery. The 5 year arm is seeing more activity now that it is significantly lower than the 30 year arm. Personally I still would heavily favor the 30 year arm with the possibility of seeing double digit interest rates in 5 years because of heavy government spending. The 1 year arm since moving above the 5 year arm has moved into no mans land with there being virtually no reason to get a 1 year arm at this point in time. Below are rates for the last few weeks.

Sep 10, 2009
30-yr 5.07 15-yr 4.50 5-yr ARM 4.51 1-yr ARM 4.64

Sep 03, 2009
30-yr 5.08 15-yr 4.54 5-yr ARM 4.59 1-yr ARM 4.62

Aug 27, 2009
30-yr 5.14 15-yr 4.58 5-yr ARM 4.67 1-yr ARM 4.69

Aug 20, 2009
30-yr 5.12 15-yr 4.56 5-yr ARM 4.57 1-yr ARM 4.69

Aug 13, 2009
30-yr 5.29 15-yr 4.68 5-yr ARM 4.75 1-yr ARM 4.72

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

In addition to rates we like to look at actual mortgage payments to gain some more perspective on mortgage rate changes. Based on current mortgage rates we determined the mortgage payment for a 200k loan. We did the same thing with rates from 2 weeks ago and rates from 6 months ago.

Sep 10
30-yr $1082.21
15-yr $1529.98
5-yr ARM $1014.55
1-yr ARM $1030.07

Aug 27
30-yr $1090.82
15-yr $1538.17
5-yr ARM $1033.67
1-yr ARM $1036.07

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

Compared to 6 months ago the mortgage payment on a 200k loan is pretty much identical. The payment is $3.68 less a month or a third of one percent.

The real question of course is where mortgage rates are going. There are a few schools of thought. The first is that mortgage rates are going to skyrocket along with inflation caused by the massive government spending over the last few years. There is another school of that that mortgage rates should rise but only slightly and that massive inflation will be curbed by the Federal Reserve.

Either way no one is advocating that mortgage rates are going to fall much further. Therefore my advice would be to look at 30 year rates and to avoid 5 and 1 year arms like the plague. If the first school of thought is correct and mortgage rates rise they will probably not move dramatically until the economy recovers.

Ki lives in Austin Texas. He site has a graph showing historical mortgage rates. His site also has news and resources on real estate in Austin as well as a search of the Austin MLS.

For the most part mortgage rates held steady this week after dropping sharply last week. The 30 year rate rose slightly from 5.12 to 5.14 after dropping from 5.29 the week before. The 15 year rate rose from 4.56 to 4.58. The 1 year arm held steady at 4.69 and the 5 year rate (the only mortgage product that saw much movement) rose from 4.57 to 4.67.

The general consensus is still that rates are going to eventual move up rapidly when the economy recovers. As long as the economy stay in the doldrums there is a decent chance rates will stay below 5.5. To put today's rates in historical context the all time low for the 30 year rate is 4.81 (reached in April 2009). So the 30 year rate is still very close to its all time low. Below are mortgage rates for the major mortgage products for the last few weeks and from January 22 (6 months ago).

Aug 27, 2009
30-yr 5.14 15-yr 4.58 5-yr ARM 4.67 1-yr ARM 4.69

Aug 20, 2009
30-yr 5.12 15-yr 4.56 5-yr ARM 4.57 1-yr ARM 4.69

Aug 13, 2009
30-yr 5.29 15-yr 4.68 5-yr ARM 4.75 1-yr ARM 4.72

Aug 06, 2009
30-yr 5.22 15-yr 4.63 5-yr ARM 4.73 1-yr ARM 4.78

Jul 30, 2009
30-yr 5.25 15-yr 4.69 5-yr ARM 4.75 1-yr ARM 4.80

Jan 22, 2009
30-yr 5.04 15-yr 5.12 5-yr ARM 4.80 1-yr ARM 5.24

For the most part mortgage rates have stayed low in spite of some encouraging signs with the economy. In addition to rates we can also look at mortgage payments. We took today's rates and translated them into a mortgage payment for a 200k loan. We also translated rates from August 13th (2 weeks ago) and January 22 (6 months ago) into a mortgage for a 200k loan.

Aug 27
30-yr $1090.82
15-yr $1538.17
5-yr ARM $1033.67
1-yr ARM $1036.07

Aug 13
30-yr $1109.36
15-yr $1548.44
5-yr ARM $1043.29
1-yr ARM $1039.68

Jan 22
30-yr $1078.53
15-yr $1594.11
5-yr ARM $1049.33
1-yr ARM $1103.16

As we saw with mortgage rates the mortgage payments are relatively stable from 2 weeks ago.

So what do we expect over the next few months? As long as the economy stays down barring other developments in the financial sector mortgage rates should stay low. When the economy starts to rebound though mortgage rates are generally expected to start rising.

What is our advice to people considering getting a loan? Basically it's the same as it has been for the last few months. I would avoid getting a 5 or 1 year arm if at all possible. Since rates should be higher in the future it makes sense to lock into long term rates while they are low. It's also a good idea to start the loan process before starting your home search. We are still in one of the strictest lending environments we have seen in decades. Minor credit issues that were ignored before are stopping loans from going through today. Starting the loan process early on can give a potential borrower time to clear up any issues on their credit report.


Ki has a comprehensive website focusing on Austin Tx real estate. Buyers can use it to search the Austin MLS. It also provides a graph showing updated mortgage interest rates.

The saying "No news is good news" might be applicable with the recent trend with mortgage rates. For the last 2 or 3 weeks for the most part rates have stayed pretty much unchanged. The reason why this could be considered good news is that the economy and stock market seem to be improving. There was a lot of discussion that an improving economy would lead to inflation and in turn higher interest rates. While I still think we are eventually headed to higher interest rates it's nice that at least that is not happening now. This week the 30 year mortgage rate dropped from 5.25 to 5.22. We also saw the 15 year rate drop from 4.69 to 4.63. The 5 year arm and 1 year arm both dropped .02 points this week (4.75 to 4.73 and 4.80 to 4.78 respectively). Below are rates for the last few weeks and from January 15th (6 months ago).

Aug 06, 2009
30-yr 5.22 15-yr 4.63 5-yr ARM 4.73 1-yr ARM 4.78

Jul 30, 2009
30-yr 5.25 15-yr 4.69 5-yr ARM 4.75 1-yr ARM 4.80

Jul 23, 2009
30-yr 5.20 15-yr 4.68 5-yr ARM 4.74 1-yr ARM 4.77

Jul 16, 2009
30-yr 5.14 15-yr 4.63 5-yr ARM 4.83 1-yr ARM 4.76

Jul 09, 2009
30-yr 5.20 15-yr 4.69 5-yr ARM 4.82 1-yr ARM 4.82

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

Looking above the 30 year mortgage rate has only moved from 5.14 to 5.25 in the last month which is remarkably stable considering the changes in the economy and the mortgage industry. Rates are still higher than what we saw six months ago but the change is not huge. To illustrate this let's look at changes in actual mortgage payments. Using our free mortgage calculator we took today's rates and translated them into a payment for a 200k loan. We did the same thing with rates from July 23 (two weeks ago) and rates from January 15th, 2009 (6 months ago).

Aug 06
30-yr $1100.69
15-yr $1543.3
5-yr ARM $1040.88
1-yr ARM $1046.91

Jul 23
30-yr $1098.22
15-yr $1548.44
5-yr ARM $1042.08
1-yr ARM $1045.7

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

From two weeks ago we are see a change of $2.47. This is pretty insignificant. When mortgage rates first started dropping we saw a difference of $35 from one week to the next running this same calculation. Compared to 6 months ago we see a rise of $31.94 or 2.98 percent. Considering the time frame this is still a relatively small change.

First off what is my advice for people looking for a home and a mortgage? I would still avoid arms. Nothing has changed basically arm's offer a small benefit right now but with most experts predicting higher rates in the future it makes sense to look in for a longer period of time with a 30 year fixed mortgage. What is our prediction moving forward? Long term I would expect rates to move up perhaps to 10 percent or more. In the short term I have been saying that it's hard to know. Know with the economy improving I would expect to see higher rates than what we are currently experiencing a month from now. That is assuming the economy doesn't start sliding backwards.


Ki lives and works in central Texas. His website covers the Austin Texas real estate market. It also has information on historical mortgage rates along with a mortgage rates widget

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.

After falling from 5.59 to 5.38 the previous week it looks like mortgage rates for the most part held steady this week. Of the four major mortgage products two fell and two rose. But for all four the movement was minimal. Thirty year mortgage rates rose from 5.38 to 5.42 and the 5 year arm rose from 4.97 to 4.99. The 15 year rate dropped slightly from 4.89 to 4.87 and the 1 year arm fell from 4.95 to 4.93. Below are rates for the last few weeks.

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

May 28, 2009
30-yr 4.91 15-yr 4.53 5-yr ARM 4.82 1-yr ARM 4.69

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

So while the 30 year rate has dropped from its recent peak of 5.59 on June 11, 2009 we are still up from the extremely low rates we saw in May. One interesting thing to note is that in the last 6 months 30 year rates have increased from 5.14 to 5.42. On the other hand 5 year arms have dropped from 5.49 to 4.99. Even with these changes I would still look for fixed rates over arms. There is a good chance that rates could be much higher in a year or 5 years when the arms would expire.

In addition to rates we also like to look at actual mortgage payments. Using our mortgage calculator we took rates from this week and converted them into a mortgage payment on 200k loan. We also did the same thing with rates from June 18th and from December 24th (6 months ago).

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

Jun 18
30-yr $1120.56
15-yr $1570.15
5-yr ARM $1069.97
1-yr ARM $1067.53

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

So as we can see the movement in the last week is minimal. Compared to 3 months ago a mortgage payment today would be $34.73 higher or 3.18 percent. Even though mortgage rates are higher than what they were before current rates are still low by historical terms.

Mortgage rates only provide part of the picture for how the lending environment is affecting the real estate market. The other part is that lenders remain very strict in their policies on when they will give out loans. So lenders are offering loans with low mortgage rates but they are not offering them to everyone.

This of course is having a serious dampening effect on the real estate markets potential recovery. Freddie Mac is particular is enforcing a number of new rules. While the government has spent significant resources on keeping mortgage rates low and easier and more effective method to help the real estate market would be to look through Freddie Mac's loan restrictions.

Ki is a realtor in Austin Texas. His site is a resource on Austin Texas real estate. It also provides a mortgage widget along with mortgage calculator code

Last week mortgage rates moved up rapidly, moving up from 4.91 to 5.29. This week mortgage rates again jumped up .3 points going from 5.29 to 5.59. On May 21st rates were sitting at 4.82 which was a 40 year low. Now just a few weeks later rates are at 5.59. This is the highest we have seen rates since November 26, 2008. Unlike last week this week all the other major mortgage products went up as well. The 15 year rate jumped from 4.79 to 5.06. The 5 year arm moved from 4.85 to 5.17 and the 1 year arm moved from 4.81 to 5.04.

So what caused the sudden spike in mortgage rates? Basically the government had a few recent auctions of government debt that went poorly. With less interest in government debt, t-bills and mortgage rates have started to increase.

Below are rates for the major mortgage products for the last few weeks.

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

May 28, 2009
30-yr 4.91 15-yr 4.53 5-yr ARM 4.82 1-yr ARM 4.69

May 21, 2009
30-yr 4.82 15-yr 4.50 5-yr ARM 4.79 1-yr ARM 4.82

May 14, 2009
30-yr 4.86 15-yr 4.52 5-yr ARM 4.82 1-yr ARM 4.71

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

In addition to rates we like to look at mortgage payments. Using a mortgage calculator we took rates from this week and translated them into a mortgage payment for a 200k loan. We also did the same thing with rates from June 4th, May 28th and from December 11, 2008 (6 months ago)

Jun 11
30-yr $1146.89
15-yr $1587.84
5-yr ARM $1094.51
1-yr ARM $1078.53

Jun 04
30-yr $1109.36
15-yr $1559.79
5-yr ARM $1055.38
1-yr ARM $1050.53

May 28
30-yr $1062.66
15-yr $1533.05
5-yr ARM $1051.74
1-yr ARM $1036.07

Dec 11
30-yr $1131.81
15-yr $1602.5
5-yr ARM $1176.05
1-yr ARM $1084.67

So as we can see mortgage payments have jumped drastically. Compared to 2 weeks ago the mortgage for a 200k loan has increased by $84.23 or 7.3 percent.

One point is that although rates have jumped rapidly historically speaking rates are still very low.

So what do we expect moving forward? There is some speculation that rates will fall after the recent rise. I am not sure if this will happen or not there are some powerful forces moving mortgage rates. And regardless of what happens in the next few weeks with the massive government borrowing its expected that in 6 months rates will be significantly higher than what we are seeing today.

So what is our advice to people looking for a home? First of all I would lock in immediately. While rates might go down there is a significant chance will continue to rise. If rates fall you can always relock at the lower rate. Additionally, I would avoid arms. Although the difference between 30 year rates and arm's has increased I would expect rates to be much higher in a year.


Ki lives in Austin Texas. His website provides information on Austin Texas real estate. It also provides a mortgage widget and a free mortgage calculator.

There was not much movement in most of the major mortgage products this week. The 30 year rate dropped from 4.86 to 4.82. This is only slightly above the 4.78 all time low that was reached a few weeks ago. The 15 year rate dropped from 4.52 to 4.50. There was some interesting movement with the 5 and 1 year arm. The 5 year arm dropped from 4.82 to 4.79. At the same time the 1 year arm rose from 4.71 to 4.82. This is the first time the 1 year arm has been above the 5 year arm. Regardless both rates are pointless because they are at or near the same rates for a 30 year arm; therefore there is no reason to get an arm instead of a 30 year mortgage in the current market. Below are mortgage rates for the last few weeks and from 6 months ago on November 20, 2008.

May 21, 2009
30-yr 4.82 15-yr 4.50 5-yr ARM 4.79 1-yr ARM 4.82

May 14, 2009
30-yr 4.86 15-yr 4.52 5-yr ARM 4.82 1-yr ARM 4.71

May 07, 2009
30-yr 4.84 15-yr 4.51 5-yr ARM 4.90 1-yr ARM 4.78

Apr 30, 2009
30-yr 4.78 15-yr 4.48 5-yr ARM 4.80 1-yr ARM 4.77

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

As we can see rates have not experienced much movement in the last month. They have continued to hover around all time lows for the month of May. They remain substantially lower than what we saw 6 months ago. In addition to rates we always like to look at actual mortgage payments. We took today's rates and translated them into a mortgage payment for a 200k mortgage. We did the same thing with rates from last week and rates from November 20, 2008.

May 21
30-yr $1051.74
15-yr $1529.98
5-yr ARM $1048.12
1-yr ARM $1051.74

May 14
30-yr $1056.59
15-yr $1532.03
5-yr ARM $1051.74
1-yr ARM $1038.47

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

A mortgage payment this week is slightly lower than what it would have been last month. This is nothing compared to the saving one would get compared to 6 months ago. For a 200k house a mortgage payment is $152.50 less a month now than it would have been on November 20, 2008 for a drop of 12.66%. This is often forgotten when the media talks about home prices being down 15% to 20%. After one factors in mortgage rates along with falling house prices the actual payments could be down over 30%.

So what do we expect to happen over the next few months? As long as the economy stays week mortgage rates will probably continue to hover around just under 5%. Once the economy starts to recover the general expectation is that rates should start to rise. It's hard to know how high mortgage rates will go once the economy recovers. Estimates have ranged from 10% to 18%. Most of this will depend on how quickly the economy recovers and if the FED moves quickly enough to changes policies from boosting the economy to slowing inflation.


Ki lives in Austin Texas. He website provides a free Austin home search. He also provides a mortgage calculator widget along with a few other mortgage widgets that show updated information on mortgage rates.

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.