Mortgage Rates Start to Trend Upward Again

Although we are not seeing too much movement it looks like mortgage rates are starting to trend upward. It's interesting to note that the stock market had its strongest July in several years. Once the economy has a full recovery there are some predictions that inflation will spike and mortgage rates will hit double digits. We are a ways from that but its interesting none the less to see rates slowly moving up and the economy slowly moves into recovery mode. All four of the major mortgage products moved up this week. The 30 year mortgage went from 5.20 to 5.25; the 15 year fixed went from 4.68 to 4.69. The 5 and 1 year arm went from 4.74 to 4.75 and 4.77 to 4.80 respectively. Below are rates from the last few weeks and from January 15, 2009 (6 months ago).

Jul 30, 2009
30-yr 5.25 15-yr 4.69 5-yr ARM 4.75 1-yr ARM 4.80

Jul 23, 2009
30-yr 5.20 15-yr 4.68 5-yr ARM 4.74 1-yr ARM 4.77

Jul 16, 2009
30-yr 5.14 15-yr 4.63 5-yr ARM 4.83 1-yr ARM 4.76

Jul 09, 2009
30-yr 5.20 15-yr 4.69 5-yr ARM 4.82 1-yr ARM 4.82

Jul 02, 2009
30-yr 5.32 15-yr 4.77 5-yr ARM 4.88 1-yr ARM 4.94

Jan 15, 2009
30-yr 4.96 15-yr 4.65 5-yr ARM 5.25 1-yr ARM 4.89

In addition to looking at rates it's always nice to translate them into actual mortgage payments. We used a mortgage calculator to translate a 200k loan into a mortgage payment based on current rates. We also did the same thing with rates from 2 weeks ago and rates from 6 months ago.

Jul 30
30-yr $1104.4
15-yr $1549.47
5-yr ARM $1043.29
1-yr ARM $1049.33

Jul 16
30-yr $1090.82
15-yr $1543.3
5-yr ARM $1052.96
1-yr ARM $1044.5

Jan 15
30-yr $1068.75
15-yr $1545.36
5-yr ARM $1104.4
1-yr ARM $1060.23

So while payments are higher (assuming one got a 30 year mortgage) they are not that much higher. Compared to 6 months ago a mortgage payment (on a 200k loan) would be $35.65 more a month or 3.33 percent higher. Enough for a fee extra coffee's a month but nothing substantial. But if rates spike up to 10 percent (as some predict) the payment would be 1755.14 which would be a 58.92 percent increase.

So what is our advice? As has been true for the last year I would avoid the arms like the plague. Although rates are up over the last few months historically speaking rates are still very low. There are very few cases where it makes sense to get an arm and risk refinancing in a few years at potentially a much higher rate. And if rates go down substantially (which is pretty unlikely) one can always refinance at the lower rate.

Also in the same vein if one is considering getting a mortgage in the next month or so I would suggest looking in early if one can do so without extra fees. Although rates could go either way there is a more of a risk of them moving up than down over the next month.

Ki writes frequently about mortgage rates. In addition to providing information about Austin Tx real estate his site provides a mortgage widget and a free mortgage calculator.