Mortgage rates rise off lows

Mortgage rates rose slightly off their record lows.

The benchmark 30-year fixed-rate mortgage rose 3 basis points this week, to 4.95 percent, according to the national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.45 discount and origination points. One year ago, the mortgage index was 5.65 percent; four weeks ago, it was 5.12 percent.

Mortgage rates for June 2, 2010

The benchmark 15-year fixed-rate mortgage edged up 2 basis points, to 4.36 percent. The benchmark 5/1 adjustable-rate mortgage fell 5 basis points, to 4.21 percent.

Refinance activity heats up

Today's mortgage rates remain near record lows, and that has lit a fire under refinance activity.

Jim Sahnger, a mortgage consultant with Palm Beach Financial Network in Stuart, Fla., says he's noticed a significant uptick in home loan activity as rates have fallen.

"People recognize the great value that exists," he says.

Refinance mortgage loan application volume is now at its highest level since October 2009, according to the Mortgage Bankers Association.

David Kuiper, a mortgage planner at First Place Bank in Holland, Mich., says refinance activity has "picked up significantly" in his market. He says homeowners who missed out the last time rates hovered near record lows "are making sure they don't miss out again."


Weekly national mortgage survey

Results of's June 2, 2010 weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

 30-year fixed15-year fixed5-year ARM
This week's rate:4.95%4.36%4.21%
Change from last week:+0.03+0.02-0.05
Monthly payment:$880.72$1,250.47$807.84
Change from last week:+$3.01+$1.68-$4.83

Chris Sipe, senior loan officer at Embrace Home Loans in Frederick, Md., also says refinancing activity is strong, especially among homeowners with adjustable-rate mortgages who hesitated to refinance earlier.

Previously, these borrowers held back because rates on fixed-loan mortgages remained at least 1 percent higher than the rate on their current ARM. That fact made them reluctant to trade their current low payment for the future long-term security and stability of a fixed-rate mortgage.

"This dip has allowed them to jump on a fixed rate that is a much more reasonable increase over their current rate," Sipe says.

However, not all is well in the world of home loans. While refinancing activity is red hot, new purchase mortgage loan activity has dropped sharply over the past month and is now at its lowest level since April 1997.

High hopes for summer

Despite such gloomy purchase numbers, all three mortgage professionals have high hopes for summer home sales.

"I'm very optimistic about summer sales here in west Michigan," Kuiper says.

First-time homebuyers continue to enter the market in Michigan, despite the recent expiration of homebuyer tax credits, he says. He also has seen "increased construction activity and second-home purchases."

Sipe says home shoppers remain patient, but are willing to act quickly if they see something they like.

"Inventories are high, and prices and rates are still low," Sipe says. "I don't see these factors changing anytime in the foreseeable future. That is going to drive demand more than anything else."

How good are the incentives to buy right now? Sahnger says mortgage rates and housing prices are both so low that "the cost to rent can be more expensive than the cost to own."

'No-brainer' for buyers

Sahnger did a little investigating in his neck of the woods, Florida's Treasure Coast. He looked on Craigslist and found a 1,300-square-foot, three-bedroom renting for $1,000. The home does not have a pool or garage and is "not (in) the best part of town."

Then, he found a three-bedroom, two-bath home in a nicer part of town for sale at around $155,000. The home has a pool and a two-car garage.

Sahnger arrived at a monthly payment of $1,054 for the second home, including the cost of principal, interest, taxes, homeowners insurance and mortgage insurance at 90 percent loan-to-value.

After crunching the numbers, Sahnger says the decision to buy the second house instead of renting the first becomes a "no-brainer for those qualified to move forward."

"(There's) no comparison between the two," he says. "Plus, you get the tax deductibility on the interest, taxes and PMI."

In fact, in light of today's low prices and rock-bottom mortgage rates, Sahnger says "this is really the best opportunity we've ever seen" for homebuyers to get a good deal.


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