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.

Although we are not seeing too much movement it looks like mortgage rates are starting to trend upward. It's interesting to note that the stock market had its strongest July in several years. Once the economy has a full recovery there are some predictions that inflation will spike and mortgage rates will hit double digits. We are a ways from that but its interesting none the less to see rates slowly moving up and the economy slowly moves into recovery mode. All four of the major mortgage products moved up this week. The 30 year mortgage went from 5.20 to 5.25; the 15 year fixed went from 4.68 to 4.69. The 5 and 1 year arm went from 4.74 to 4.75 and 4.77 to 4.80 respectively. Below are rates from the last few weeks and from January 15, 2009 (6 months ago).

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

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

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

In addition to looking at rates it's always nice to translate them into actual mortgage payments. We used a mortgage calculator to translate a 200k loan into a mortgage payment based on current rates. We also did the same thing with rates from 2 weeks ago and rates from 6 months ago.

Jul 30
30-yr $1104.4
15-yr $1549.47
5-yr ARM $1043.29
1-yr ARM $1049.33

Jul 16
30-yr $1090.82
15-yr $1543.3
5-yr ARM $1052.96
1-yr ARM $1044.5

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

So while payments are higher (assuming one got a 30 year mortgage) they are not that much higher. Compared to 6 months ago a mortgage payment (on a 200k loan) would be $35.65 more a month or 3.33 percent higher. Enough for a fee extra coffee's a month but nothing substantial. But if rates spike up to 10 percent (as some predict) the payment would be 1755.14 which would be a 58.92 percent increase.

So what is our advice? As has been true for the last year I would avoid the arms like the plague. Although rates are up over the last few months historically speaking rates are still very low. There are very few cases where it makes sense to get an arm and risk refinancing in a few years at potentially a much higher rate. And if rates go down substantially (which is pretty unlikely) one can always refinance at the lower rate.

Also in the same vein if one is considering getting a mortgage in the next month or so I would suggest looking in early if one can do so without extra fees. Although rates could go either way there is a more of a risk of them moving up than down over the next month.


Ki writes frequently about mortgage rates. In addition to providing information about Austin Tx real estate his site provides a mortgage widget and a free mortgage calculator.

There is a provision in the Housing and Economic Recovery Act of 2008 that allows first time home buyers the ability to receive a credit on their taxes of up to $7,500 for purchasing a home. There is also a provision in the American Recovery and Reinvestment Act of 2009 that expands this tax credit for qualified first time home owners. The provision is called the first-time homebuyer credit.

The 2008 first-time homebuyer credit was created to infuse the slumping housing market, and is treated like an interest-free loan. Qualified participants were required to repay the loan interest-free over a period of 15 years, making 15 equal annual payments. You can find more details about this tax credit on the IRS website.

The provision in the American Recovery and Reinvestment Act of 2009 increased the first-time homebuyer tax credit to $8,000 for purchases made January 1 - November 30, 2009. In contrast to the 2008 tax credit, new home owners do not have to repay the credit as long as they do not sell their home within three years of closing on the home.

You need to be armed with the facts before you go to purchase a home on the assumption that you'll receive the credit. The following FAQs will help you navigate through the quagmire of confusion that has surrounded this tax credit.

* Who is eligible? Taxpayers who have not owned a home within the U.S. three years prior to purchasing a new or resale home in the United States. The closing and transfer of title on the home must be completed between April 9 and December 31, 2008 for the 2008 credit, and between January 1, 2009 and November 30, 2009 for the 2009 credit.

* What is the amount of credit? The credit allows for 10 percent of the purchase price. The maximum credit is $7,500 for 2008 and $8,000 for 2009.

* Are there income limits? Income limits are $75,000 for a single filer and $150,000 for a couple filing jointly. The IRS bases the credit on your modified adjusted gross income (MAGI). Your MAGI equals your adjusted gross income (AGI) plus IRA contribution deductions, foreign housing deductions, student loan deductions, higher education expense deductions and foreign income. Partial credit is available to some with higher MAGI.

* Does my home qualify? The home qualifies if it is the taxpayer's principal residence, is located within the U.S. and purchased between April 9, 2008 through July 1, 2009 for the 2008 tax credit, and January 1, 2008 through November 30, 2009 for the 2009 tax credit. For new construction, the date you actually occupy the residence will be considered the purchase date.

* What if I don't owe taxes or I'm exempt from filing? It doesn't matter. The credit applies to qualified applicants regardless of filing requirements, even to those who do not owe taxes or are exempt from filing. You may file solely to claim the first-time home buyer credit.

* How do I claim the credit? Although you are not required to claim the credit, you may do so by filing a Form 5405. You'll need to file the form with the applicable 2008 or 2009 federal income tax return.

* Does the tax credit act as a tax deduction? No. A tax deduction only diminishes the amount of income taxed. For instance, if the taxpayer's AGI is $40,000, then a deduction would reduce the amount taxed by $8,000, depending on the amount of applicable credit. The taxpayer would be taxed on the remaining amount of $32,000. Instead, the credit is directly deducted from what the taxpayer owes the government. If the taxpayer owes $2,000 to the IRS, then $6,000 would be the amount refunded to the taxpayer. If the taxpayer owes nothing, then the entire $8,000 would be refunded, depending on the applicable credit.

Ki has sold Austin real estate for almost 10 years. He works with a variety of buyers. His website offers listings directly from the Austin MLS. His site also has general information on Austin real estate and a mortgage widget to keep up to do on current trends with mortgage rates.

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.