The Fed Increases The Discount Rate And Mortgage Rates Start To Rise

So the big new recently was the FED increasing the discount rate. While the increase was not totally unexpected it comes at an interesting time. The FED is showing signs that they are worried about inflation and feel that the economy is on more solid ground. This is interesting because recently the economy has shown more signs of weakness. We saw most of the major mortgage products increase this week. The 30 year rate rose from 4.93 to 5.05 this week. This marks the largest fluctuation (up or down) we have seen this year with mortgage rates being surprisingly stable. Even with this rise rates are still near historic lows. The 15 year rose from 4.33 to 4.40. The 5 and 1 year arms rose from 4.12 to 4.16 (5 year arm) and 4.23 to 4.15 (1 year arm). Below are rates from the weeks from Jan 28, 2010 to Feb 25, 2010 along with rates from August 27, 2009 (six months ago).

Feb 25, 2010
30-fixed 5.05 15-fixed 4.40 5 ARM 4.16 1 ARM 4.15

Feb 18, 2010
30-fixed 4.93 15-fixed 4.33 5 ARM 4.12 1 ARM 4.23

Feb 11, 2010
30-fixed 4.97 15-fixed 4.34 5 ARM 4.19 1 ARM 4.33

Feb 04, 2010
30-fixed 5.01 15-fixed 4.40 5 ARM 4.27 1 ARM 4.22

Jan 28, 2010
30-fixed 4.98 15-fixed 4.39 5 ARM 4.25 1 ARM 4.29

Aug 27, 2009
30-fixed 5.14 15-fixed 4.58 5 ARM 4.67 1 ARM 4.69

As we can see even with the jump this week rates have been relatively stable staying between 4.93 and 5.50 over the last month. In addition to rates is also interesting to look at mortgage payments. We took today's rates and translated them into a payment for a 200k loan using our free mortgage calculator. We also did the same thing with rates from February, 11 2010 and rates from August, 27 2009

Feb 25
30-year $1079.76
15-year $1519.78
5-year ARM $973.37
1-year ARM $972.2

Feb 11
30-year $1069.97
15-year $1513.68
5-year ARM $976.86
1-year ARM $993.26

Aug 27
30-year $1090.82
15-year $1538.17
5-year ARM $1033.67
1-year ARM $1036.07

As we saw before the last two weeks has seen minimal movement. For a 200k loan the payment is 9.79 more a month for an increase of less than one percent.

So moving forward what do we see? The general expectation has been that mortgage rates were going to rise over the next year. Now with a weakening economy there are some arguments being made that mortgage rates might remain roughly where they are for the next year. If you are thinking of getting a loan it's probably better to get one sooner than later. While there is some argument about whether rates are going to go up, with rates at all time lows, there is no speculation that rates are going to go down. So while there is a risk to waiting to lock into a mortgage there doesn't seem to be a huge benefit to waiting.

By: Dane Smith

Article Directory: http://www.articledashboard.com

Ki works as a realtor in the Austin real estate market. His site escapesomewhere provides a free mortgage calculator along with some mortgage widgets.