People are still paying a high Interest Rate.

America's real mortgage rate

November 12, 2010 12:05 pm

Record low mortgage rates? Too bad no one is taking advantage of them. Most homeowners still pay around 6% for their loans.

Mortgage rates dropped to another record low this week following the Fed's move to pump hundreds of billions of dollars into the U.S. economy. Though officials hope that buying Treasuries with newly-printed money will give the slow-growing economy a big boost, the move likely won't give today's homeowners much relief.

Now is one of the cheapest times in decades to finance a home, but few are actually locking in record low mortgage rates. This isn't just because many don't qualify for refinancing as home prices plummet and banks continue to enforce tighter lending standards.

It's also because many owners who locked in relatively low rates between 2003 and 2005 don't think it's worth refinancing, according to a U.S. Federal Reserve study of the mortgage market released in September. This is a factor that has largely been overlooked.

It's true millions have been trying to redo the terms of their home loans to reduce their monthly payments. Yet a sizable group also thinks their current interest rates are at least bearable – they don't want to spend the money or time to take out a new loan for only slightly lower rate.

Mortgage rates are at their lowest since at least 1971. The rate for a 30-year fixed loan fell to 4.17% in the week ended Thursday from 4.24%, according to Freddie Mac (FMCC). The average 15-year rate declined to 3.57% from 3.63%.

But interest paid on the vast majority of home loans is much higher than the record rates, according JPMorgan, which tracks the outstanding U.S. mortgages by major lenders including Freddie Mac and Fannie Mae (FNMA). As of October 31, only about 16% of fixed-rate mortgages and 12% on floating mortgages paid between 4% to 4.99%.

A relatively bigger proportion, about 27%, are adjustable rate mortgages that fluctuate with the market and pay a lower rate ranging between 3% to 3.99%. Still, at least half of outstanding home loans still pay 5% or higher regardless of whether a fix or floating rate.

Historically when rates have dropped significantly, there's typically a flurry of refinancing.

And indeed, that happened recently when the average annual rate for a prime-quality 30-year fixed rate mortgage fell abruptly at the end of 2008 and through 2009, falling below 5% in April and May. Refinancing boomed, peaking to more than 645,000 loans in May 2009 before dropping back to monthly levels similar to those seen in 2006 and 2007, according the Fed's report.

But the recent surge in refinancing doesn't compare to what was seen historically – it's in stark contrast to the levels seen between 2001 to 2003 when rates fell sharply. In 2003 when rates were slightly more than 5%, the volume of refinance loans rose to more than 15 million, markedly greater than volumes in 2009 of about 5.8 million loans.

"There's a lot of head scratching right now as to why people aren't refinancing," says Freddie Mac Chief Economist Amy Crew Cutts. "The applications are high but the closings are low."

Cutts points to various factors, including high unemployment, home values falling well below the balances of mortgages and stricter lending standards at many major banks.

Whatever the reason, it appears homeowners aren't benefiting much from the Fed's policy prescription to accelerate the economic recovery. Who knows how low mortgage rates will go or if it will even matter months from today.

Who pays what?

Interest Rate	Total	Fixed	ARM
1% - 1.99%	0%	0%	0%
2% - 2.99%	2%	1%	7%
3% - 3.99%	4%	1%	27%
4% - 4.99%	15%	16%	12%
5% - 5.99%	38%	41%	17%
6% - 6.99%	28%	29%	21%
7% - 7.99%	8%	8%	8%
8% - 8.99%	3%	3%	4%
9% - 9.99%	1%	1%	2%
>=10%	1%	1%	2%

Source: JPMorgan

Well it has been a busy summer and fall as most of you are all aware. The rates are really good right now. We have had a great time with out client appreciation event at the pumpkin patch. I am hoping that we will have pictures coming soon. We had a great turnout and had a great time taking wagon rides around the field. I hope you had a great time as well. Please let me know how you liked it. we have a great time at all of our client events.

As far as mortgage rates go. they are continuing to stay low. we are still around 4-4.25% on the Conventional and FHA rate with apr of 4.25 and 4.875%. If you know anyone that has not refinanced please let them know they are still low and there are options to get around having mortgage insurance. I would love to help them. Thanks for all you help already this year.

As far as looking forward. The rates should stay low for sometime. property values are remaining stable to marginally declining still. There are still a lot of foreclosures and short sales still around and will be around for some time. So it should still be a great time to buy for a while.

I hope all is going well and please visit often for I will start blogging more and have good articles that I have read.

The end of the Government Money

Well it is coming up on the end of March. This means that the government will not buy any more mortgage bonds after this next week. This will finish up a 1.250 trillion dollars of money that the government has used to keep mortgage rates lower. The question now is what will happen?

There are many economist predict many different things that will happen to mortgage rates after the government stops buying these bonds. I have read that rates will go up anywhere from a half a percent to a full percent by the end of the year. Either way in my opinion these are still great rates.

The fed has also stressed that even though they have stopped buying bonds, they are going to work hard to keep rates down to continue to make homes more affordable.

This means that it is still a great time to buy.

New Year New Guidlines

Well it has been well over a year since I last posted a blog. But I find that writing this helps me to relieve some stress and to hopefully inform people of what is happening with my job and work.

There have been a lot more guideline changes this year that are still occurring and making myself spend more time to originate loans and spend less time out finding loans. So if you read this I would appreciate your help in helping me. Thank You in advance.

With all of the changes that are occurring it really makes it nice to study and learn all of the new guidelines. Sometimes it can feel monotonous but when things change it is a good time to learn and to educate myself on all of the guidelines.

I had a great year last year. I had many referrals from many past clients and others that I was able to help refinance and get into new homes. The amount of money that I saved clients was in the tens of thousands of dollars range last year and it was exciting to help them. I hope to help many more people this year.

As far as some of the changes that have happened. .... There is a new good faith estimate this year that is supposed to helping out clients understand the cost of the loan. In my opinion it is more confusing than the old one, but I will follow the rules and use the new good faith estimate like I am supposed to.

I will try to make more post about work and myself on this and hope to draw people to it. Thanks again.