Mortgage Rates Rise After Hitting All Time Lows

Last week mortgage rates hit all time lows with the 30 year mortgage rate reaching 4.78. This week the 30 year rates moved up a little to 4.87. While this is a decent one week rise we are looking at rates that are probably still in the bottom 10 for all time lowest rates. The only other viable mortgage rate, the 15 year fixed mortgage, rose to 4.54 to 4.52. Rates for the 5 and 1 year arm both rose this week. But both mortgage products are seeing very little use these days (as has been the case for several months) because they are near or above the rate for the 30 year fixed mortgage. I have seen a few cases where on certain properties banks will only offer arm's but besides these cases rates for 5 and 1 year arm's are dead. Below are rates for the last several weeks.

Apr 09, 2009
30-yr 4.87 15-yr 4.54 5-yr ARM 4.93 1-yr ARM 4.83

Apr 02, 2009
30-yr 4.78 15-yr 4.52 5-yr ARM 4.92 1-yr ARM 4.75

Mar 26, 2009
30-yr 4.85 15-yr 4.58 5-yr ARM 4.96 1-yr ARM 4.85

Mar 19, 2009
30-yr 4.98 15-yr 4.61 5-yr ARM 4.98 1-yr ARM 4.91

Mar 12, 2009
30-yr 5.03 15-yr 4.64 5-yr ARM 4.99 1-yr ARM 4.80

As we can see mortgage rates fell for the last several weeks before rising last week. In addition to rates we also like to look at actual mortgage payments. We took today's rates and translated them into a monthly payment on a 200k mortgage. We also look at payments based on rates from a week ago, when they hit all time lows, and rates from October 16th.

Apr 09
30-yr 1057.8
15-yr 1534.07
5-yr ARM 1065.1
1-yr ARM 1052.96

Apr 02
30-yr 1046.91
15-yr 1532.03
5-yr ARM 1063.88
1-yr ARM 1043.29

Oct 16
30-yr $1258.87
15-yr $1702.87
5-yr ARM $1217.16
1-yr ARM $1093.28

So while rates went up this week, they are still substantially lower than they were a few months ago. Compared to October 16th one's payment would be 19% less. This illustrates the importance of mortgage rates in the home buying equation. While people frequently concentrate on what prices are doing falling mortgage rates can often play a larger role on mortgage payments over short periods of time. While prices have fallen since October in most markets they have not fallen 19%.

So what do we expect to happen with mortgage rates over the next month? In the next few months mortgage rates could fall below 4.5 if 1) the economy doesn't recover and b) the government continues intervening to push mortgage rates down. But once the economy recovers the general expectation is that rates could rise rapidly. So far a weak economy has kept inflation in check. Once the economy recovers rates could rise to above 10 percent like we saw in the 80's.

By: Dane Smith

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Ki blogs regularly about mortgage rates. His site also has information on Austin Tx real estate along with a free mortgage calculator widget.