Consumers take lower rates to bank

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Annual 30-year, fixed-rate mortgage averages Source: Freddie Mac

— With mortgage rates hovering around a two-year low, local lenders have been busy locking in low rates for their customers.

The average 30-year, fixed-rate mortgage last week was 5.96 percent, according to a survey by Freddie Mac, a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. It was the lowest rate since the week ending Sept. 29, 2005, when it averaged 5.91 percent.

"Right now, it's a real opportune time for second-home buyers or people looking to move here," said Chad James of Homebuyers Mortgage of Steamboat Springs.

It also has been the time for many to refinance, especially those whose rates were about to skyrocket because of adjustable rate mortgages, or ARMS.

"People who have ARMS from 2004 or 2005 that are going to adjust from say 5 to 8 percent have a good opportunity to refinance," James said.

Getting locked into a new rate that is just a quarter percent lower could mean savings for some people.

James said he recently helped a client who is paying off a $420,000 30-year, fixed-rate mortgage. The interest rate was locked in at 6.25 percent. After refinancing, the new rate will be 5.625 percent.

James said his client's payment will go from $2,751 to $2,479, a savings of $272 a month.

"Sometimes, all it takes is a quarter or an eighth (of a percent)," said Kathryn Pedersen, mortgage officer at First National Bank of Steamboat Springs.

But, she said a lower interest rate does not always mean it is worth restructuring a loan or refinancing.

"Sometimes it does, and sometimes it doesn't," Pedersen said. "Really, the best thing they can do is call a qualified professional who can run the different scenarios. Come in and we can go through what you're in."

All it takes is a productive phone conversation or an hour-long meeting with a mortgage professional, she said.

Another group of people taking advantage of the low rates are those looking to purchase their first home.

"We deal with a lot of first-time homebuyers," Pedersen said.

Generally speaking, lower interest rates mean people can qualify for a larger loan.

"Enough of a dip can get people into a place," Pedersen said.

What mortgage interest rates will do in the future is always the big question when people are considering refinancing.

On Tuesday, the Federal Reserve is expected to cut interest rates by a quarter- or even a half-percent.

This speculation has somewhat fueled the lower rates, but a rate cut does not necessarily translate into lower mortgage interest rates.

"U.S. nonfarm productivity jumped by an annual rate of 6.3 percent in the third quarter, the most since 2003, while labor costs fell 2 percent," Frank Nothaft, Freddie Mac vice president and chief economist, said in a news release. "Greater efficiencies and lower costs ease pressures for companies to raise prices and offer the Federal Reserve (Fed) more leeway to reduce short-term rates. Currently, the federal funds futures market has almost a 100 percent probability that the Fed will lower rates in its December 11th policy committee meeting. These combined factors will likely diminish upward pressures on mortgage rates over the next few months."

Comments

corduroy 6 years, 4 months ago

I need to do more research. How long do I have to wait after my initial purchase to look into refinancing? 5.6% is a lot better than the 7.% I got..

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Kathryn 6 years, 4 months ago

Corduroy - It depends on if you have a prepayment penalty or not. If you do not have one then you can refinance right away. Ultimately it depends on your specific situation. That is why it is always best to speak to a mortgage professional. They will be able to look at your current mortgage paperwork and then run numbers to see if it will benefit you to refinance. (Sometimes it does not make sense financially to refinance because of the costs to redo your loan). I hope that helps!

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steamboatsconscience 6 years, 4 months ago

cord if you have a Jumbo (over $417K) the only way is to get a conforming loan, meaning coming up with the cash to get it down to below that. Today's jumbo rate is 6.72%, 30 year fixed conforming is 5.8%, 5/1 is 5.62%. Watch out for points. they will eat you up.

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steamboatsconscience 6 years, 4 months ago

wouldnt expect anything else from someone without a soul

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dogd 6 years, 4 months ago

St CON: You need to study further- the REAL cause of the mortgage crisis is not the brokers, though there are any number of bad ones -to blame the brokers is the S&L's strategy for avoiding the blame (and the additional oversight) that they (banks) SHOULD have coming. You are buying the bank's BS as surely as they thought that you would.

The true deal is that the banks decided to tap the hunger of the hedge-funds, and other consumers of high-risk- (supposedly high reward) product... by issuing insane products such as 100% loans so that people who (according to thier own credit reports) had seldom ever paid ANYTHING on time, could buy a house with NO MONEY DOWN.....and...

Every one of those type loans had an adjustable feature. The adjustable feature is not the broker's fault...it is the BANKER's Fault. My GOD the banks are efficient liars...they know the brokers (no, I'm NOT one) are too stupid to defend themselves.

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steamboatsconscience 6 years, 4 months ago

sbob i deal with the market on a daily basis so i have studied further. of course its the banks fault , the brokers are just their shills. every one of them are lying about their books to support the illusion and their stock price. its all about greed. read what i wrote on the waller article, bankers and mortgage brokers have one motivation. make as much money as they can. period. some do it honestly, some dont, some fall into the grey areas. borrowers bear responsibility too, sometimes they were greedy.its all moral hazard, so to speak.

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housepoor 6 years, 4 months ago

no doubt about it, dealing with a mortgage broker is like a used car salesman.......buyer beware........going directly to the bank for the loan seems to take away a lot of the bs and is usually cut and dry.

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Chad James 6 years, 4 months ago

This has got to be one of the most unbelieveable places I've ever seen on the web. Unfiltered, anonymous comments directed toward a persons reputation that are allowed to stay up. Steamboat Conscience....you're like the Wizard of Oz. Big voice behind a curtain...when you come out from behind what will we see?

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Chad James 6 years, 4 months ago

I've been trying to get the site to let me post my name and email to no avail, so here it is: Chad James, cw@cwjames.com. Please feel free to contact me if you'd like to talk more about your assumptions as to what I may have said in the interview with Matt.

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sturn 6 years, 4 months ago

Chad, thanks for the breath of fresh air. Someone who actually wants to be known in the thread! It gives you a lot of credibility that these others don't (don't want to?) have. In civil conversations people are generally known. Without identity people are more apt to throw gasoline on the conversation just for the sake of trashing someone else. www.i'm a bully.com !! Thanks for the entertainment.

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foodchain 6 years, 4 months ago

The identify of "SteamboatsConscience" is not relevant to the issue at hand. He apparently has very sophisticated knowledge on issues relating to mortgage banking.

Engage in debate with him, if you will. I do not care what his identity is. I enjoy reading his posts.

Those of us who made some money off of hedge funds may be part of the problem. But overall, SC's analysis is astute and informed.

Prior to asserting critique of SC's analysis, spend your time understanding how securitization of mortgage loans has occurred versus how it was intended to occur to make capital available for mortgage lending. Securitization was a relatively new concept among the banking law elite in the mid 80's.

SC is absolutely correct as to what is at the crux of the problem in my not so humble op-onion.

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steamboatsconscience 6 years, 4 months ago

Chad Ignore that person behind the curtain! LOL OK, I would like you to either verify or deny whether what i hypothesized about your client's mortgage situation is as I stated, then we can discuss whether I was right or wrong. BTW, I am not singling you out, but you put yourself out there and I feel that you are putting out misleading information in not saying whether your client refied from a Jumbo to a conforming.

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foodchain 6 years, 4 months ago

I agree with SC. It sure does appear that the client refied from a Jumbo to a conforming. By ommission of that fact, the article is very misleading.

But heck, what do I know.... I just get a chuckle out of seeing the word "jumbo" printed over and over.

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steamboatsconscience 6 years, 4 months ago

Chad If you are now only realizing that you can get trashed anonymously on this forum than you are living in a vacuum, and dont know Gary Wall, Dr. D, anyone on the School Board, City Council or any illegal immigrants

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foodchain 6 years, 4 months ago

SC, you did not "trash" Chad. Rather, you called him out and challenged him for what appears to be an very misleading article.

Chad--step up or step off.

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foodchain 6 years, 4 months ago

Still waiting for Chad to address the real issue SC has put into play. tap tap tap tap.............

Still waiting.

I am not holding my breath though.

Chad. I think you have been pwned.

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steamboatsconscience 6 years, 4 months ago

food all I do is trade the market and pay attention to what is happening in the world. The biggest problem is that people are too busy with their own lives that they dont pay attention to whats happening outside of it that actually does affect them. The mortgage and housing crisis outside of our little burg is going to come to roost here at some point, lets see how many people are going to forgo their ski trip to steamboat so they can pay their mortgage and credit card debt. Today my Countrywide Financial short paid my next month's mortgage, thank you. If you are interested in getting a trader's perspective on what is going on in the market and mortgage mess, here is a forum of pretty smart people who see through the BS. http://www.tickerforum.org/cgi-ticker/akcs-www Even sbvor would like the political and tinfoil sections!

Glad you enjoy my posts, just trying to help us little guys see whats "behind the curtain" (although I prefer "underneath the kimono")

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BigOil 6 years, 4 months ago

Steamboatconscience - what you have failed to understand is that the limit for jumbo loans was recently raised. So the combination of market conditions (rate, jumbo limit increase, credit ratings, etc) may have made this an attractive time for this client to refi. The client may not have known that the jumbo limit had been raised and that is where a professional can help. They're not shills, they're making a living like anyone else. Surprising you can't see the big picture.

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Chad James 6 years, 4 months ago

Hello invisible man, easter bunny and santa claus...sorryI haven't responded to your prods...too busy "fleecing america".

Chad

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steamboatsconscience 6 years, 4 months ago

Bigoil provide a link as to the Jumbo limit has been raised, as far as I know it still is $417K. Back up your statement. Better yet let Chad answer that question. Chad Wow you are a mind reader too! Did your client go from a Jumbo to a conforming? Thats all I want to know.

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Chad James 6 years, 4 months ago

Santa, of course he did. Of course I stated that in my interview, of course he had a buy back of about 15 months...and of course it was still a good deal for him.

Jumbo is still $417K

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steamboatsconscience 6 years, 4 months ago

Hey Brent I see Chad had my first post deleted which was my original statement that he gave misleading information on the loan example he gives. Without that post people will not know the point of this discussion. There was only one word in that post that could have been offensive , the last one and you can delete that word. But I would appreciate that post be put back. Of course Chad is an advertiser and I am sure that would influence your decision giving it more credence than the First Amendment.

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steamboatsconscience 6 years, 4 months ago

Thanks Chad Guess Matt "forgot" to put that in the article. Now, I have a $500K loan at 6.25% and dont have $80K more to put down but I really want that 5.62% loan. Can you do that for me?

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Chad James 6 years, 4 months ago

Not an advertiser...

Sorry your post was deleted, Santa. Sprinkle on some of that dust that makes your reindeer fly and see if you can get it to magically appear.

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Chad James 6 years, 4 months ago

I'd have to refer you to another Shill...sorry. She'll of course tell you that "sure...for the right price you can have almost any rate you want."

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steamboatsconscience 6 years, 4 months ago

You just proved my point Sorry only coal for you this xmas Santa

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foodchain 6 years, 4 months ago

ahahaha. SC shoots and he scores. Chad is being shut out of the game.

Thanks for the link SC-San.

I often wear a Kimono while studying the market. Um, does that mean you are flirting with me?

Shorting Countrywide was a gimme. Nice job.

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foodchain 6 years, 4 months ago

Unfortunately, the real losers are those who cannot read and understand SC's first post that was deleted.

Too bad most people cannot see what is right in front of them.

Then again, that just leaves more opportunity for those of us who do understand what is going on in the banking industry and economics in general to make money shorting stocks such as Countywide and otherwise plan carefully for our future years that will be lived in relative leasure in these beautiful mountain surroundings in affordable housing. Heh. Affordable to me, anyway.

Kimono clad and glad.

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Scott Wedel 6 years, 4 months ago

I'm surprised that another big error by the reporter has gone uncriticized. That lower rates will make it easier for first time home buyers. That would be true if all else was unchanged, but first time home buyers are greatly affected by how much of a down payment is needed and a year ago 0% down was easily available. Now it isn't.

Other thing going on is that ARMs are often based upon the LIBOR (interbank borrowing rate). And the difference between the LIBOR and rates controlled by the US Federal Reserve have been growing due to all the bad credit out there.

Other part of the whole Subprime debacle that while politicians keep saying how important it is to keep people in their homes, there are a whole lot of people now with negative equity in their home (loan greater than property value) and in places where the market has dropped 20% then these home owners probably should walk away. They'd recover faster from the bad credit or even bankruptcy than making a decade of house payments just to pay down the mortgage to the current value of the property. They'd probably be better off if that big monthly mortgage payment was split between rent and actually investing some money. It is real hard to get ahead borrowing money at 8% or more.

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BigOil 6 years, 4 months ago

The Jumbo limit is reviewed every year and was last raised in Jan 06: http://www.fanniemae.com/newsreleases/2005/3649.jhtml?p=Media&s=News+Releases

Look guys this is a simple news article in a small town rag - not a PHD thesis. I found it to be informative and useful. Give Chad a call and talk to him directly if you have questions.

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thecondoguy1 6 years, 4 months ago

BigOil, sorry, me thinks your credibility is out the window, reference the two year old article that is a joke in a mortgage market that changes by the hour. Maybe the benefit of all this mortgage mess and duplicity will occur when the impact hits the resort areas, a 10,000 square foot Catamount pad will be available for $417,000, and bought up for affordable housing..... it could happen.....................

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thecondoguy1 6 years, 4 months ago

exactly, bubba, lets hope I am wrong......................

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