Rates rise off record lows

Mortgage rates went up this week, stopping a four-week streak of record-low rates for the 30-year fixed.

Mortgage rates for August 18, 2010

The benchmark 30-year, fixed-rate mortgage rose 6 basis points this week, to 4.63 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 0.43 discount and origination points. One year ago, the mortgage index was 5.52 percent; four weeks ago, it was 4.74 percent.

After tying a modern record low four weeks ago at 4.74 percent, the 30-year fixed fell the next three weeks, bottoming out at 4.57 percent. Rates had last reached those depths a couple of generations ago, in the mid-1950s.

The benchmark 15-year, fixed-rate mortgage rose 5 basis points, to 4.11 percent. The benchmark 5/1 adjustable-rate mortgage rose 3 basis points, to 3.95 percent, and the 30-year, fixed-rate jumbo fell 1 basis point, to 5.26 percent.


Weekly national mortgage survey

Results of's Aug. 18, 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:4.63%4.11%3.95%
Change from last week:+0.06+0.05+0.03
Monthly payment:$848.82$1,229.60$782.99
Change from last week:+$5.91+$4.15+$2.85

Refinance activity soars

As mortgage rates hit bottom, homeowners got busy and applied for refinances. Refi activity last week was at its highest level since May 2009, according to the Mortgage Bankers Association, or MBA. About 81 percent of mortgage applications were for refinances, the MBA said.

Here's a factoid to put things into perspective for borrowers despairing over missing mortgage rates at their lowest: Two weeks ago, this week's benchmark rate on the 30-year fixed would have been a modern record.

To put it another way, this is the second-lowest the 30-year fixed has been in the 25-year history of Bankrate's weekly survey. By historical standards, mortgage rates are extremely low right now.

Jeff Lazerson, president of Mortgage Grader, a brokerage in Laguna Niguel, Calif., says his advice to would-be refinancers is: "Do not wait. Do not get complacent, thinking that low rates are going to be around forever, because they can change at any point."

New mortgage maze

Lazerson has another bit of advice, born of his frustration with recent changes in the mortgage industry. Because of rules emanating from Fannie Mae and Freddie Mac, lenders must behave as if they can't trust anything borrowers say.

Lenders call employers to make sure borrowers aren't lying about having jobs. Lenders get tax transcripts from the Internal Revenue Service instead of assuming the borrower's photocopies of tax returns are accurate. Lenders check credit reports when borrowers apply -- and then again just before closing to make sure they didn't open a bunch of new credit card accounts and go on a shopping frenzy.

"Every consumer must talk to a loan officer that knows how to get through the mortgage maze," Lazerson says. "Because the problems in lending today are the strenuous underwriting requirements, about all the stuff that lenders won't do. So even though they'll quote you a rate, at the end of the day, a lot of times you're going to get knocked out for really stupid, non-obvious reasons."

A seasoned broker or loan officer understands where the potential pitfalls are, Lazerson says.

Ironically, lending standards are stricter because Fannie Mae and Freddie Mac, which are government-controlled at the moment, have been pressuring lenders. On the other hand, the federal government has been trying to boost home sales and mortgage refinances. The two government policies contradict each other.


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