August Mortgage Newsletter

August Mortgage Newsletter
Fed Cuts Rate By .25%
On July 31st, the Federal Open Market Committee lowered the overnight lending rate by .25%. This was the
first rate cut since December of 2008. The global economy and flat inflation were cited as reasons for the rate
cut. Forecasts are for another rate cut by the end of the year.
While the Fed determines the overnight lending rate, Mortgage rates are not directly set by the Fed. The 10
year Treasury Note is a good indicator for Mortgage rates and is market driven similar to Mortgage rates.
Prior to the Fed announcement, many analysts had predicted the rate cut and therefore, the market had already
adjusted to the predicted rate cut.
President Trump has been critical of the Fed policy and welcomes the rate cut so the economy can continue
to grow, and unemployment to stay low. He continues to press for more rate cuts even though unemployment
is near all time lows at 3.7%. A bigger problem could be the predicted economic slow down due to the Trade War.
Rates are approaching all-time lows. Here are our current rates:
30 Year Fixed Rate: 3.5%
FHA 30 Year Fixed: 2.875%
15 Year Fixed Rate: 3%
10 and 7 Year ARM: 3.5%
The lowest 30 Year Fixed I can recall closing was 3.25% and that was several years ago. Recently I did close
a transaction at 3.375%. Rates hovering around .25% within the lowest in the history is a pretty amazing rate.
Sometimes I get calls of those that want to wait to see if the rates will come down. It is always my
recommendation to lock in rates and if there is an improvement of .25%, we can do a float down of .125%. We have one of the best float down policies in the industry.
Since interest rates have come down significantly, I have been getting more questions regarding lower term
mortgage rates. Here is an illustration for a $300,000 mortgage and payments at current rates made during the
term of a loan.
$300,000 Loan Amount Monthly Payment
(Principal and Interest)
Total Payments Made
30 Year Fixed@ 3.5% $1,347.13 $484,966.80
20 Year Fixed@ 3.375% $1,720.67 $412,960.80
15 Year Fixed@ 3.0% $2,071.74 $372,913.20
As you can see, there is a significant amount of saving by lowering the term of your mortgage. While it may
seem like a large difference in payment, it is not uncommon for household income to increase during the
duration of a mortgage. If you already have a mortgage, it may be a good time for you to consider refinancing.
Depending upon your loan amount, as little as .5% will amount to enough savings to justify closing expenses
associated with a refinance.
Sometimes there are pricing anomalies. With interest rates so low, it may make sense to pay a point. If your
rate is a .25% lower by paying a point, it may be worth it, particularly if you are going for a shorter term
mortgage. Please feel free to discuss this with me since everyone has unique needs.
Vibha Singh
NMLS ID 66034
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