Have Mortgage Rates Hit Bottom?; Rates Continue Upward Spiral, Quicken Loans Reports

Business Wire ^ | 07-16-03

[Brian S]

Business Editors/Real Estate & Personal Finance Writers

LIVONIA, Mich.--(BUSINESS WIRE)--July 16, 2003--Mortgage rates have skyrocketed almost a full percentage point since hitting record 40-year lows the week of June 13, prompting many to wonder if this marks the end to the record low mortgage rates that have fueled record home sales and refinancing activity the past several years.

Mortgage rates have inched upward in recent weeks. A month ago, the rate on a 30-year fixed rate mortgage averaged about 5.2 percent. Today, the rate on a 30-year fixed mortgage is nearing six percent.

"Time may be running out for those who haven't yet refinanced," said Bob Walters, Quicken Loans chief economist. "There are many homeowners who still could benefit from refinancing but haven't because they have been waiting for rates to hit bottom or simply too busy to initiate the process. They don't realize how much easier it is to refinance, especially given today's technology and the Internet."

While rates have gone up in recent weeks, many consumers could still achieve significant savings. In fact, rates on adjustable rate mortgages (ARMs) are still in the four percent range.

"Fixed rates make sense for many consumers but they are not the only game in town," says Walters. "The average home owner does not stay in a mortgage for more than six years, so for many an adjustable rate mortgage (ARM) might make more sense. The relatively steep yield curve on ARMs has given many consumers an opportunity to take advantage of very low adjustable rate mortgages."

(Quicken Loans has a variety of online calculators consumers can use to determine if refinancing makes sense for them, or to compare the difference between fixed and adjustable rate mortgages. These calculators are available in the Refinance Section of Quickenloans.com.)

About Quicken Loans. Quicken Loans is one of the country's largest home loan lenders and a leading online lender, closing loans in all 50 states via Quickenloans.com. Quicken Loans has nearly 20 years experience and its 1,600 mortgage professional expect to close between $13 billion and $15 billion in home loans in 2003.

Named a "Best of the Web" mortgage site by Forbes, Money and PC magazines, the Quickenloans.com website offers all the tools clients need to explore their mortgage options, including mortgage calculators, tips and articles, live chat with mortgage professionals and online applications.

Note to media: Quicken Loans officials are available for comment. Quicken Loans also can assist you in locating consumers who are in the mortgage process and willing to offer their perspective. Contact Elizabeth Jones at 734/805-7137.

--30--SLB/cl*

CONTACT: Quicken Loans Elizabeth Jones, 734/805-7137 ElizabethJones@quickenloans.com

KEYWORD: MICHIGAN INDUSTRY KEYWORD: E-COMMERCE INTERNET BANKING SOURCE: Quicken Loans

[Chancellor Palpatine]

And thus starts the upturn of the last half of 2003 through 2007...

[Steven W.]

this article truly falls into the "DUH, unless you're a complete and total moron, you really haven't been paying attention" category.

[Doodle]

So Brian, are you a mortgage broker?

[caisson71]

Interest rates started "spiraling" the day after Greenspan LOWERED the Fed rate by .25%.

[Phantom Lord]

Fixed rates have spiked over the past month. But ARMs are as attractive as ever. Not to mention that ARMs have out performed fixed rates in every imaginable aspect over the past 25 years. I will NEVER get a fixed rate mortgage and suggest that no one ever gets one. ARMs are the way to go.

[Dems_R_Losers]

I am in the process of refinancing now (I know, I know, I missed the bottom of the rate drop, but what can I say, I am not organized). Do you really think I should get an ARM? I am planning a major home addition and staying in my house for at least another 15 years. I was going to get a 15-year fixed, at least those rates are slightly lower than the 30 year rates and the total interest savings is substantial.

[Phantom Lord]

With planning a major home addition, how much is it going to cost and how long will it take to complete it? Without knowing a damn thing about your situation, my initial gut reaction and advise is something like a 3 year ARM to refinance your current mortgage, and take out a Home Equity Line of Credit (HELOC) for a bit more than the expected cost of the addition. After all, nothing ever comes in on budget or on time. Write checks off the HELOC as construction progresses. Upon completion you can refinance the 1st and HELOC into one loan. Be it a 15 year fixed if that is what your heart is set on, or to an ARM and make accelerated payments to pay it off in 15 years.

Though, I am sure you have never held a mortgage for 15 years in your life, and trust me, you will not hold this new one for 15 years either.

(I know, I know, I missed the bottom of the rate drop, but what can I say, I am not organized).

If you catch the bottom it is by accident. I do this for a living (most of my income at least) and I missed the bottom on my current refinance (3/1 ARM).

If you loan size is large enough, you should be able to do a "No Closing Cost" refinance. You will pay a slightly higher rate, but the lender will pay all of your closing fees. The beauty of this, especially with my above scenario is that you can turn around and refinance it again and not have to worry about the closing costs you just paid.

You can FReepmail me with any questions you have on any aspect of mortgages.

[IYAS9YAS]

Got a good source for more information on ARMs? I'd love to be able to take advantage of the lower rates right now, but have too much other debt to make a move.

[Phantom Lord]

The best source I have for ARMs is my brain and experience in the business and as a homeowner. You can FReepmail me with any questions you have.

[hopespringseternal]

If you catch the bottom it is by accident.

Not to mention that around this time I couldn't get a mortgage broker's attention at gunpoint. Very few would return a phone call, and the ones that did were offering a full point higher than the advertised going rate.

[CO_dreamer]

They have outperformed for the last 25 years, but, IMO, anyone getting an ARM today is stupid. I had one 15 years ago when interest rates were in the 9% range and saved a substantial amount of money when rates declined every year I had the mortgage. But that was because rates declined every year. Had rates gone up every year, I'd have been in big trouble.

Large deficits, a weak dollar, and a move toward Euro financing of oil sales all point to higher inflation, thus higher interest rates over the next few years.

Interest rates are at near record lows right now. You can play your luck, and try to gain another percent or two over the next few years, or you can be safe and lock in these low rates. If it was me, I'd lock in the low rates. Rather than risk forced refinancing in 3 years at much higher rates, I'd take the low rates and refinance on my own in three years if rates actually DO go down.

[Mannaggia l'America]

Do you really think I should get an ARM? I am planning a major home addition and staying in my house for at least another 15 years.

Most ARMs are capped at 6% above the base rate. So add 6% and see if you can live with that rate in the worst case scenario. I think also most have a 2% increase per year cap. Another factor is to see what the rate is based upon.

I'm doing a major addition (and kitchen remodel) also. I went for a 30-year fixed at 5.125%. But I'm conservative in my money also....

But I also know people who got ARMs back in the early 90's because they had to (they didn't qualify for a fixed rate loan at the rate back then) and they have been very happy with them.

[Phantom Lord]

I got my 1 Year ARM in 1999. It has FALLEN ever year since at the annual adjustment. I am refinancing to a 3/1 ARM that is LOWER than my current 1 year ARM rate. I will be out of this house in 4 to 5 years.

The avg. length that a mortgage is held in America is a whopping 52 months. Just under 4.5 years. A 3/1 ARM or a 5/1 ARM is the best product for a vast majority of home owners. Why get a 30 year fixed rate mortgage 2% or more higher than the 5/1 ARM when the chance of you refinancing or moving within 5 years is overwhelming?

[Phantom Lord]

Further, I have had customers who in the past 12 months alone have refinanced 3 times! Did they listen to me and get an ARM at the first refinance? No. The 2nd? No. The 3rd? Most of them did.

[cmak9]

ARMs are the way to go

Sorry, but no they're not. Getting out of debt has been, is, and always will be the way to go. ARM's have nowhere to go but up, and up they will go. In the recent low interest times, an ARM might have seemed the way to go, but, unless people start paying us to borrow money, how much lower can they go? Get that house paid off, just like any other debt (fixed rate, 15 year mortgage, pay extra if you can). Any gains that could be had by investing the money elsewhere are offset by the insecurity of not owning a place to live, should the crap ever hit the fan (especially post 9-11, the crap could hit the fan bigtime, at anytime). It's not brain surgery, it's not advanced economic theory, it's "horse sense", just like our grandparents had. Don't owe anybody anything, as soon as possible. Just my opinion, but it stands the test of time.

Lending Tree gave me outstanding service on a 4.875% 15 year fixed rate a month ago. Simplest thing I've ever done in my life, they came to my house to close.

[Phantom Lord]

Get that house paid off, just like any other debt

ARMs amortize faster than a fixed rate loan of the same term. And as you suggested, paying extra if you can, and you will have it paid off faster than if you did the same with a fixed rate loan.

Lending Tree gave me outstanding service on a 4.875% 15 year fixed rate a month ago.

That was a high rate for a 15 year fixed a month ago.

[Mo1]

Donate Here By Secure Server

Or mail checks to
FreeRepublic , LLC
PO BOX 9771
FRESNO, CA 93794
or you can use
PayPal at Jimrob@psnw.com

Become A Monthly Donor
STOP BY AND BUMP THE FUNDRAISER THREAD
Thanks Registered

[kmiller1k]

I am refinancing as we speak and am so disappointed with the interest rates today. I had thought about a ARM but don't know enough about them. Do any of them come with an opportunity to "capture" the rate for the length of the loan? I've had my current loan for 12 months (just glad I didn't pay any points) and can't believe I'm already doing the refi.

[psjones]

With rates this low and having more upside than downside, we went with a 30 year fixed rate on our new house. We plan on being in this house for a long time. We're quite happy with our 5 1/8 rate. Refinancing can be a pain, besides there's the expense of refinancing and the savings are not seen for a while. The only reason I'd go with
an ARM at this time when rates are at the lowest level I will most likely see in my lifetime, would be if I know for a fact that I will be in the house for a short period of time, even then, though, nothing is for certain.

We lived in our previous for 15 years, we looked at homes on and off for the past 5 years, and finally found something we really liked back in January of this year. Love the house, love the location, I don't regret waiting this long to make the move, and after all the work that it takes to move, I don't want to be doing this again for a long, long time.

[Brian S]

So Brian, are you a mortgage broker?

No, I process foreclosures...

[Phantom Lord]

There are ARMs available with a "conversion" option available at the end of the initial fixed rate period. Ask your lender about that option and how it works.

I've had my current loan for 12 months (just glad I didn't pay any points) and can't believe I'm already doing the refi.

Another fine example of why I strongly support and push ARMs.

[Phantom Lord]

We lived in our previous for 15 years

When you sold the home did you have the original mortgage from the purchase of the home?

[cmak9]

Lending Tree gave me outstanding service on a 4.875% 15 year fixed rate a month ago. That was a high rate for a 15 year fixed a month ago.

Wasn't that bad, 4.75 was the lowest I saw (month ago is approximate). As the fellow before said, at the time you couldn't get a mortgage broker's attention at gunpoint, and Lending Tree sent me 2 offers within 1 day. It beat the 6.875% I was at (30 year fixed), which I had been paying extra on also, had it down to 19 years anyway. I'll be out of this loan in 10 years or less (because I'll have it paid off ;-). Payment went up less than $10.00 (got rid of PMI), shaved 4 years off, skipped a month of payments, got $1K back from escrow, no hassles, no problems. I might have found a slightly better rate, if any of these mortgage people would have responded to my initial inquiries. I was happy with Bank of America, but they sent me a reponse saying they were "too busy". Too busy, too bad. Service your existing customers, they won't go way, you won't need as many new ones.

Interest on ARMS is going to go up, up, up. My principal is going to go down, down, down to zero. Of course you could do the same with an ARM, I suppose, it's just harder to predict. Budgeting is what gets you out of debt, and it's harder to budget when you don't know what your house payment is going to be from year to year. To each his own, my plan works for me.

[Phantom Lord]

Interest on ARMS is going to go up, up, up

I have been hearing that for 6 years plus. And all they have done is go down, down, down. Both market rates and the rates on existing ARMs at adjustment. Especially those tied to LIBOR.

skipped a month of payments

Yes and no. The interest for the month the loan was closed in was paid at closing (as was interest on the loan being refinanced), so you did pay it, you just didnt pay it in a monthly payment.

My principal is going to go down, down, down to zero. Of course you could do the same with an ARM, I suppose, it's just harder to predict.

Of course you could, you suppose? Yes, you can with an ARM. As stated before, ARMs actually amortize faster than a fixed rate mortgage during periods where their rate is below what you would have gotten with a fixed rate loan. And accelerated payments only compound this faster amortization. And it is not harder to predict. From day one you know exactly what your rate and payment is for the fixed period, and you know exactly what the worst case scenario is for all the years following the fixed period.

Also, little known thing about ARMs, when the rate adjusts the new payment is based of the new rate, outstanding balance on the loan, and the term remaining. Further excellerating the amortization.

And the amount of people out there who will hold a mortgage for a period of time exceeding 5 to 7 years is so small that it could almost not be counted. In the 6 plus years I have been doing mortgages I have had a total of 2 customers who have held a mortgage for greater than 7 years. 2!

You might be the 1 in a million who actually holds a mortgage for 7 to 10 years or more.

The last people who should ever get a fixed rate is a young, newly married, first house couple. They will not be in the home for an extended period of time.

[MattinNJ]

Have you read "Financial Peace" by David Ramsey?

[cmak9]

Have you read "Financial Peace" by David Ramsey?

No, but I listen to his radio show pretty often. He's based in Nashville, where I live. His principles are very sound, and will work. I can attest to them. Alas, they're not for everybody it seems ;-). When others are still debating ARMS and the intricacies of finance, I will not have to. I won't owe anybody.

[MattinNJ]

I was in Nashville in 96 for a few months on business and listened to him every day. I even read his books. It's a very comforting feeling having a plan in place. I'm almost debt free other than the mortgage. Once the last bill is paid and I save 6 months salary I'll up my 401k to 15% and fully fund my two year old's 529 plan. I figure that will take a year. Another 5-6 years to pay off my mortgage and then it's gravy time baby.

[knak]

Can I freepmail you questions about mortgages too? Are you in the business?

[knak]

I'm trying to buy a foreclosure! My first.

[Phantom Lord]

Yes I am and Yes you can. Might not respond till tomorrow though.

[Centurion2000]

bump

[cmak9]

Another 5-6 years to pay off my mortgage and then it's gravy time baby.

Amen brother, good luck! Dave Ramsey's advice really is nothing more than "horse sense", stuff that was pounded into my head early on. I listen to him to get back on track though. It's easy to wander off sometimes. The best thing I ever did financially was paying off car debt. Now, between my wife and I, we own 4 debt free cars (okay, 3 of them are mine, but she own's a house that's paid for, so I guess that's got me beat!). We don't make a lot of money either. Getting rid of debt is the way to live, no doubt about it.

[knak]

ok, thanks

[JNB]

The upturn is going to hit a nasty dead end as the extra money that consumers have been spending via re-fis runs dry, since they will no longer to re-fi at lower rates like they have been doing since Fall of 2000. Take away re-fis and housing related activity, and the economy would have had a recession worse than the 81-82 recession.

[CobaltBlue]

As a member of Costco, I caught the bottom by accident - almost - my husband was reluctant to "deal with someone over the internet" so wanted to let our existing company compete for the business - over the course of a week the Costco/Lending Tree offer went from 5 1/8 to 5 1/4. We locked at that.

They are Fedexing the closing documents tomorrow and we will close Monday.

If you are a member of Costco, I advise giving this service a try.

[CobaltBlue]

You are right that most Americans don't hold their mortgage for many years.

My husband works for the federal government and is 45. We aren't going anywhere for 20 years. Your mileage varies.

For beginners, I don't know a better place to start than the Mortgage Professor, who has calculators where you can input all kinds of variables to help make decisions, like your marginal tax rate, the interest rate you can get on investments, closing costs, you name it.
http://www.mtgprofessor.com/

[CobaltBlue]

>>No, I process foreclosures...<<

Interesting. I am a lawyer, handling an increasing number of Chapter 7s, thinking about branching out into 13s. ;^)

[psjones]

We refinanced our mortgage 10 years ago from a 10 percent rate, but it was such a hassle to refinance and our intention was to eventually move that we did not refinance even when rates dropped. At 3k to refinance, it would have taken us a few years to make that money and we did not intend to stay in the house.
I would only recommend ARM if a) you think rates will be going down enough to make a big difference to your mortgage, which is highly unlikely at current rates,
B) if you know that you will definitely be selling before the your ARM adusts

ARM is okay for people who have to take a lower rate to be able to afford the house and for short term mortgages.

I don't like the idea of refinancing and taking out equity in your home unless you absolutely need to do so, otherwise that house will never be paid off, especially once you get older.

Mortgage lenders, however, would love to have people refinance every year, that's how they make their money,
take a look at the closing costs and how all the little stuff adds up.

[auggy]

I applied for refinancing 2 weeks ago. I have been trying to lock in the rates for a week with a phone call daily, but cannot get the bitch to return my call. I am thoroughly disgusted.

[psjones]

I'd take my business elsewhere if your calls are not returned. We also considered going thru greenlighloans.com for our mortgage lender, but because they had a 21 day lock, which had we been able to look into the future, would have been perfect timing to hit the bottom of the rates, we decided to go with the lender provided by the developer which offered a 30 day lock.

[auggy]

I am going to try one more time today, then I will have to go else where.