Home mortage rate direction?

[Gale Hawkins]

After Friday's S&P downgrade of USA debt and this morning down grading of Fannie Mae, etc debt rating some are saying get rid of variable rates and get into fixed rate home loans.

Any one with long term experiences in home loan rates. I know in 1981 CD rates hit near 20% right after we got married.

 

[riptides]

I view variables as a short term, say under 5 year, tool.

Fixed for the 10+ year investment.

That said, I don't think the market will go any lower, in mortages, and even if it did, LTV and equity remain to be a huge problem to solve for the masses.

 

[oldnslo]

After Friday's S&P downgrade of USA debt and this morning down grading of Fannie Mae, etc debt rating some are saying get rid of variable rates and get into fixed rate home loans.

Any one with long term experiences in home loan rates. I know in 1981 CD rates hit near 20% right after we got married.

If and I say IF you believe the economists on TV you can expect to see a rise in interest rates soon. Talking to my financial advisor she is telling me to get rid of any "floating" interest debt and pay off any credit cards ASAP. I will be the first to admit I am no expert, that is why I am paying for one..

Roy

 

[dave1949]

After Friday's S&P downgrade of USA debt and this morning down grading of Fannie Mae, etc debt rating some are saying get rid of variable rates and get into fixed rate home loans.

Any one with long term experiences in home loan rates. I know in 1981 CD rates hit near 20% right after we got married.

That can be difficult from what I hear. My son had a fixed mortgage and an ARM, a good ARM, not the rip-off type. When rates went low, he decided to refinance the whole thing with a single fixed rate loan while adding cash to his equity at the same time. He could hardly get a bank to return his calls, took over a year to get it done and lots of silly paperwork along the way.
Dave.

 

[Gale Hawkins]

I agree interest rates only have one direction they can travel in.

This time around if there are interest rate hikes and NO salary increases to off set it it will bite harder. We know not to expect any cost of living increase to be reflected in any government checks. This is the way to cut entitlement programs without cutting them directly.

 

[riptides]

That can be difficult from what I hear. My son had a fixed mortgage and an ARM, a good ARM, not the rip-off type. When rates went low, he decided to refinance the whole thing with a single fixed rate loan while adding cash to his equity at the same time. He could hardly get a bank to return his calls, took over a year to get it done and lots of silly paperwork along the way.
Dave.

I lived through a recent FHA refi.

Barely.

To think of the level of effort involved, a lesser person would have walked. It was a flipping comedy of errors and if there was an alternative given, it was bankrupcy.

Unreal.

 

[tcartwri]

With the number of people living paycheck to paycheck, an interest rise would be an all out disaster. It will be the last thing they do, however they will keep threatening to do it to try and keep people from further over financing.

 

[dave1949]

I lived through a recent FHA refi.

Barely.

To think of the level of effort involved, a lesser person would have walked. It was a flipping comedy of errors and if there was an alternative given, it was bankrupcy.

Unreal.

Yeah, his biggest comedy was that since he holds a small portion in an LLC for his job, it's a venture capital funded software product, the bank wanted complete info on the entire LLC. He told them he couldn't release that info even if he had access to all of it. So, then he asked if the loan could be approved on the DIL's income alone, they looked at that and said, okay.

On the other hand, my less prosperous son and fiance bought and moved into a short sale house in four months. I think part of their loan was gov't backed due their income levels, although they both work hard at steady jobs. There were three sign-offs needed for the short sale; the seller, the seller's bank servicing the mortgage, and finally the bank that actually held the paper on the mortgage.

Just from my kid's experiences, I would expect it to be a 'process'. :laughing:
Dave.

 

[joemd11]

We re-financed last spring and it was a long and tedious process. Mounds of paperwork and photocopies of w-2's, checks, etc. The guy that appraised our house went thru every room taking pictures. Things are much tighter now and I think that is good. As far as rates go, I think they can only go up. When and how much they go up??????

 

[Gale Hawkins]

With the number of people living paycheck to paycheck, an interest rise would be an all out disaster. It will be the last thing they do, however they will keep threatening to do it to try and keep people from further over financing.

Tim when you talk about "they" are you talking about China. Based on the press this morning they are not happy about holding all that degraded paper and are demanding change by Congress.

Who is going to lend us the $2.4 trillon we decided to borrow last week. Our lenders and not our goverment will be setting future interest rates.

Keep in mind the Chinese may think the cheapest and fastest way to becoming the next #1 world power will be to eat the USA debt they hold vs. building up a world class military machine to become #1 by force.

At this point I am clueless how the Chinese government looks at the long term picture. Right now we are offering them the USA jobs in exchange for loans from them. They do know what have to the Soviet Union military when they ran out of cash. Do they expect the same of the USA military war machine.

Some day something is going to give but what and when I do not know. Since they have us on the ropes offically as of last Friday who knows what happens next. We may get a clue at the next sell of US debt paper.

At what interest rate will be telling. ANY up tick will tell us their thoughts I expect.

 

[tcartwri]

Who is going to lend us the $2.4 trillon we decided to borrow last week. Our lenders and not our goverment will be setting future interest rates.

Up here The Bank of Canada sets the prime lending rate and the commercial banks mirror it if they want to be competetive. The Federal finance ministers have been warning us for years that the rate is going up soooon.... but it will not happen unless we get into heavy inflation. Our housing markets have actually been ballooning in value and saw very little of the hit you guys took. If they move the rate up quickly, or at all, people would loose their shirts.

Not locking in, and not worried about it.

 

[riptides]

I think people put too much fear into the China buys.

Last I checked, they are not a capitalist based economy, a free-market, nor a country without serious government involvement in business ventures.

I believe them to be more fragile on the human side of financial peril then us.....

 

[Gale Hawkins]

I think people put too much fear into the China buys.

Last I checked, they are not a capitalist based economy, a free-market, nor a country without serious government involvement in business ventures.

I believe them to be more fragile on the human side of financial peril then us.....

I give China 25 years before they peak and have do deal with our 1937 problems sooner than later. They are not a country of opportinuity like the USA where it is everyday people that are the driving force of growth.

The USA will stumble for a few more years as we stop the bleed and develop a climate where businesses can once again thrive. Paying people $30-50 an hour for $ 10-$20 an hour jobs just lead to high unemployment over time due to these over paid rates. Income tax collected will help us dig out from this enlarged work force and help with the SS, etc programs.

 

[ultrarunner]

After Friday's S&P downgrade of USA debt and this morning down grading of Fannie Mae, etc debt rating some are saying get rid of variable rates and get into fixed rate home loans.

Any one with long term experiences in home loan rates. I know in 1981 CD rates hit near 20% right after we got married.

I remember well... it was also the year I graduated with my Engineering Degree and there was absolutely nothing available on the job front...

I had always worked and worked part time jobs through school... looking around, I saw that home prices were so depressed in my area that rent would cover the Principal, Taxes, Insurance and Interest... so I bought my first fixer and glad I did...

 

[Gator6x4]

After Friday's S&P downgrade of USA debt and this morning down grading of Fannie Mae, etc debt rating some are saying get rid of variable rates and get into fixed rate home loans.

Any one with long term experiences in home loan rates. I know in 1981 CD rates hit near 20% right after we got married.

Some people refer to "ARM" mortgages as "Nightmare Mortgages" Moving from an ARM to a fixed rate is sometimes very costly. The best thing to do is confer with someone knowledgeable in home mortgages. ARM mortgages were very popular in the days of the booming real estate market. Buy a house get a ARM mortgage, live in the house two years sell, take the profit and upgrade to a larger home. Repeat the process in two years. A good article and worth the read is here:
Nightmare Mortgages

 

[ultrarunner]

My one and only ARM mortgage is for the home I reside... I've had it 6 years and the rate has dropped each year and is 3%...

If push come to shove and the rate reverses and goes up... I will look at it compared to other things and decide if it is time to retire it.

 

[Mudfarmer]

That can be difficult from what I hear. My son had a fixed mortgage and an ARM, a good ARM, not the rip-off type. When rates went low, he decided to refinance the whole thing with a single fixed rate loan while adding cash to his equity at the same time. He could hardly get a bank to return his calls, took over a year to get it done and lots of silly paperwork along the way.
Dave.

Had the same experience last year refinancing a condo I co-own with my son. Never have I seen so much rigamarole, right down to proving I owed no taxes on the home (fully paid for) that I am living in.
Mf

 

[Bird]

I've never had an ARM, but when I bought this place in 2005, I got a 30 year mortgage at 5.75% fixed. I figured I'd get a long mortgage just in case I should run short of cash, and just pay extra on it each month. Prime Lending arranged the mortgage at a tenth of a percent and a lot less trouble than my credit union wanted. Then of course, they sold the note to Wells Fargo, and I knew at the time it would be sold to some bank or mortgage company. Then last year Wells Fargo offered their "in home, no cost" refinancing; different rates for different time periods, etc. and I elected a 15 yr. mortgage at 4.125% and all we had to do was go get the documents they sent notarized and call UPS to come pick them up. I could have gotten a better interest rate if I'd wanted to pay for an appraisal and all the trouble some of you have had.

 

[jimmyj]

It's not really possible for rates to go any lower so they can only increase. That said, how much and how fast. I can't imagine the gov't would let them get too high - it would spell disaster (or should I say "even more disaster.)

These are pretty scary times to say the least.

 

[Ken45101]

While I agree that logically rates should go up, the U.S. government HAS to do everything it can to prevent that from happening.

If short term interest rates go up, then the interest rates that the government pays on it's debt will skyrocket, busting the already broken budget to smithereens.

That's why the government went from long term bonds to short term Treasury Notes years ago: they cannot control long term rates but they can have the Federal Reserve hold down short term rates.

Interest payments are a significant portion of federal revenues (40%?). If interest rates double? Triple? THAT is why the Fed keeps short term rates so low.

Ken