After falling for most of the month of July Mortgage interest rates jumped up. And not only did they move up they jumped to the highest levels we have seen in 2008. 30 Year rates jumped from 6.26 to 6.63 last week. To put that in perspective for the entire month of May mortgage rates fluctuated between 5.98 to 6.08. The increases were not confined to 30 Year rates, 15 year rates went from 5.78 to 6.18, 5 Year Arms went from 5.80 to 6.16 and 1 Year Arms went from 5.10 to 5.49. The interest rates we saw this week for all the major 4 mortgage products were the highest numbers we have seen for all of 2008. When was the last time we saw mortgage rates this high? I looked back through 2007 to find the last time we saw rates this high for the different mortgage products.
30 year - August 2 , 2007
15 Year - August 16, 2007
5 Year - September 20, 2007
1 Year - December 27, 2008
Below are mortgage rates for the last few weeks.
July 24,2008
30-yr 6.63 15-yr 6.18 5-yr ARM 6.16 1-yr ARM 5.49
July 17,2008
30-yr 6.26 15-yr 5.78 5-yr ARM 5.80 1-yr ARM 5.10
July 10,2008
30-yr 6.37 15-yr 5.91 5-yr ARM 5.82 1-yr ARM 5.17
July 3,2008
30-yr 6.35 15-yr 5.92 5-yr ARM 5.78 1-yr ARM 5.17
June 26,2008
30-yr 6.45 15-yr 6.04 5-yr ARM 5.99 1-yr ARM 5.27
Ok so mortgage rates are one thing. But what does this mean for an actual mortgage. using our free mortgage calculator and pulling a number out of a hat we looked at how these rate increases would affect a 200k mortgage.
July 24th
30-yr $1281.28
15-yr $1707.22
5-yr ARM $1219.75
1-yr ARM $1134.32
July 17th
30-yr $1232.73
15-yr $1664.03
5-yr ARM $1173.5
1-yr ARM $1085.89
So starting off the monthly payment on a 200k mortgage with 30 Year loan would be $48.55 more this week compared to last (1232.73 to 1281.28). A 15 Year mortgage would have increased $43.19, a 5 year mortgage increased $46.25, and a 1 year mortgage would have increased $48.43.
So why have rates risen so dramatically. A few bank closures have probably caused some uncertainty in the market. Additionally the FED spent the early part of the year trying to keep rates down and basically ignoring the risk of inflation. That has changed as inflation signs have started to crop up. So now the FED is worried more about the risk of inflation.
So usually when one mortgage product rises I advise potential home buyers to look at the other mortgage products. But this week all the mortgage products rose more or less equally. Therefore my advice would be to start looking at putting down more cash. With interest rates moving up near 7 it might be a good idea to evaluate other investments and consider putting a large down payment on a house. If you are thinking of buying a house in the next few months its probably a good idea to start paying more attention to savings.
So what is going to happen next week? Usually after we see a sudden large increase or decrease the next week we see rates move a little bit in the opposite direction. But what happens with mortgage interest rates over the next week and the next few months to a large extent is going to be based on what happens with the banks and the mortgage industry and at this point with all the turmoil in the markets its a little hard to predict what is going to happen next.
