A direct quote from a Branch Manager at one of the major lenders in our area:
"The volatility continues as Mortgage Bonds opened lower this morning, but then erased their losses. Since May 21, the 4.5% coupon has shed 556 basis points, pushing home loan rates to the highest level since the Federal Reserve announced its Mortgage Backed Security purchase plan back in November. Fears of future inflation and added supply have been the culprits behind the recent sell-off."
What does that mean? In short, mortgage interest rates are on the rise and might continue to rise in the short term. Today, according to our Mortgage Rate Watch, the average rate in America for a 30-year-fixed loan is 5.85%.
Let's put that into perspective... Let's say Buyer 1 purchased a home back on May 21st for $500k with a 20% down payment. Let's also say Buyer 2 purchase a home today (not even a whole month later) for the same price and down payment. Who do you think is kicking themselves in the butt?
| Date | Purchase Price | Loan | Rate | Monthly Payment | |
|---|---|---|---|---|---|
| Buyer 1 | May 21, 2009 | $500,000 | 30-Year-Fixed | 4.5% | $2,026.74 |
| Buyer 2 | June 12, 2009 | $500,000 | 30-Year-Fixed | 5.85 | $2,359.76 |
That's over $330 a month that Buyer 2 is paying more than Buyer 1. For those of you considering to wait longer for prices to go down, you might want to reconsider. Even if the price magically drops another 10% (to $450,000), at today's rate your monthly payment is $2,123.79. Still $100 over Buyer 1's payment.
