Where are the 4.5% rates?

So where are the 4.5% rates, you are wondering? Your clients are asking, I am sure. They ask me too! Well, as you can see below, the rates are not far from that at 4.625%. But keep in mind, to get that, you MUST pay 1% origination fee (1% of the loan amount added to closing costs). If you want to ‘waive’ that fee, you can expect .625-.75% higher interest rate. That is a far cry from the .25% in the past. In other words, it makes sense to pay the 1% origination for many people, who expect to be in the home a long time. For those on a 6 year or less timeline, maybe not pay the point, and save your cash.

Why such a large spread between the 1 Origination and 0 Origination? I have heard several theories (a) lenders do not want to sell the higher coupons (rates), as they anticipate rates will go down, and their fallout will increase (b) they have been burned in the past paying originators the premiums on the back end, just to have early payoff in low rate markets, and (c) no one knows. I pick C! Does anyone really know?

Another rumor I have heard, is that some , if not all, of the big banks are losing money in their mortgage divisions. Big money. So they are hesitant to lower their rates because they are adding larger margins than in the past. To make it ‘worth it’ for them to stay in business. The margins from 03/04 when the rates were also at historic lows, and lenders could not print money fast enough, were turbulent times. Hiring frenzies, backlog in processing and fundings. The grass was not necessarily greener on the lenders’ side. Are they now remorseful and learning from their mistakes?

The FED meets this week for a 2 day meeting (Tuesday/Wednesday). For the first time, they will not consider lowering or increasing the rates. They will be concentrating instead on strategy to get the economy turned around.

On a personal front, I took my home off the market this week after 90 days. 27 showings and 4 offers later, we were just amazed at some of the offers (low) we were getting. So, since we don’t have to sell, we decided to stay put for now. I know, agents hate sellers like us. But as my article last week mentioned, the psychology (of buyers and sellers) must change in order for the market to get moving again. Even in Houston, a healthy, stable real estate market. As for me, I am stubborn, wanting a fair price for my house. A price that was there 1 year ago. Not willing to accept that the psychology of the CNN glued buyers are driving prices down. They think that all sellers are going bankrupt? No thanks, I would rather wait.

Have a great and prosperous week! Remember, we at Patriot Bank Mortgage are your trusted source in mortgage lending. We are here for you! Steadfast and strong.