Mortgage Rates Fall To Two Year Low

November 27th, 2007 categories: Real Estate Finance

It has been a volatile 24 hours in the mortgage industry. Bonds are currently hovering at their 2 year ceiling. We saw two midday price changes yesterday for the better. Conforming rates are fantastic.

The biggest news of the day is the infusion of $7.5 billion dollars of capital into CitiGroup from Abu Dhabi Investment Authority. This huge investment will help CitiGroup recover from huge losses in subprime mortgages.

Goldman Sachs is forecasting the Feds will cut rates again as long as inflation stays in check. Lowering rates could actually hurt bonds and potentially drive mortgage rates higher if inflation becomes a problem. The Fed’s favorite measure of inflation, the PCE, will be announced on Friday.

Today’s Consumer Confidence numbers for November were announced at 87.3 which was well below expectations but not really too surprising giving the negative media consumers are bombarded with daily. It was the worst reading since October of 2005.

Also today, it was announced the conforming loan limit will remain the same for 2008 at $417,000.

So what does this all mean. Is the sky falling down, is the end near? The answer depends on who you talk to. My personal opinion is still that financing terms are attractive and available. You can lock in a 30 year mortgage under 6.0%. It seems to me that many of the average consumers are overlooking the obvious–there is no guarantee that rates below 6.0%, minimum down payment requirement, and easy qualifying guidelines will continue.

There are even rumors that Fannie Mae and Feddie Mac are running low on liquid capital. If they stop buying conforming loans from lenders at their current rate, the lending environment will turn VERY COLD very fast.

Historically rates below 6.0% are phenomenal and rare. If the credit crisis gets any worse, I think loans will get even harder to qualify for, require more down payment, and interest rates will be higher to cover the potential risks.

For someone with a stable job who wants to own their home, now is the time to take advantage of a distressed seller to negotiate a good deal but more importantly the time to take advantage of the mortgage financing available.

There may be a time in the not so distant future where you need 10 or even 20% minimum down payment to qualify for a mortgage. Today, you can still qualify with as little as 0% down for some, and 3% down for most for a 30 year fixed mortgage at 6.0%. Sounds pretty good to me. In fact, I refinanced my house and locked in at 6.0%. I am going to paint my walls and rearrange my furniture while I contently wait out the turmoil.

Today’s Rates

Conforming 30 year Fixed

5.75% @ 1 point
6.0% @ 0 points

Conforming 5/1 Interest Only ARM

5.625% @ 1 point
6.375% @ 0 points

Jumbo 30 Year Fixed

6.875% @ 1 point
7.375% @ 0 points

Jumbo 5/1 Interest Only ARM

6.125% @ 1 point
6.875% @ 0 points

Lysa Catlin
CMC Finance Inc.
(858) 456-3000

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Mortgage Rates Fall To Two Year Low

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