South Orange County Real Estate

by Nick Bublik & Irina Bond

Beware of a Mortgage Rate Spike This April

Last year the Treasury department announced that they would stop buying mortgage backed securities as 2009 wound down.  This year the Feds will continue the $1.25 trillion purchase program of mortgage-backed securities, which has decreased the 30-year conforming fixed-rate mortgage to all-time lows in the past year, until March 31, 2010.  But what happens after March 31st?

Foreign investors have already shied away from purchasing mortgage backed securities for obvious reasons.  There really is no security in this investment anymore.  Few, if any investors actually service the loans, and with the housing industry still very weak, and loan servicers holding almost all the power over the loans, investors are no longer flocking to purchase the loans from the original lenders.  The lenders control modifications, payment forebearance rights, foreclosure proceedings decisions, etc.

It is predicted that in order to entice investors, mortgage rates will have to rise dramatically in the near future.  We are hearing rates numbers in the mid 5% range up to “the sky’s the limit” types of rates.

Historically, mortgage rates moved in tandem with the yield and pricing on the 10 year Treasury bond.  Currently, investors are dumping their holdings in this bond with new inventory due to be released shortly.

The rise in mortgage rates WILL impact buying power for those who have been reluctant to make that move recently.  As an example, the interest only payment on a $200,000 mortgage at 4.5% is $750.00 for the first payment.  At 5.25% that interest only payment rises to $875.00 for the first payment.  That is a substantial difference in monthly payment.  If rates rise to 6%, that interest only payment will rise to $1,000.00.  A buyer loses $50,000 in purchasing power with that 1.5% increase in rate!

Analysts are suggesting that IF rates should rise as high as 6%, we could see another 10% drop in home values by the end of 2010.

In some areas, housing is again starting to sell, and sellers are holding the line on pricing at least until the home buyer tax credits run out.  If you are one of the people contemplating buying a house to cash in on that tax credit, you might seriously think about getting off the fence now.  Even if prices drop, who knows when or if we will see mortgage rates as low as they are now. Granted, rates have already risen, but they are still very low historically.

Modified from http://www.examiner.com/x-21893-Mortgage-and-Housing-Examiner~y2009m12d28-Lack-of-buyers-for-mortgage-backed-securities-could-cause-mortgage-rates-to-rise-a-LOT-in-2010?cid=exrss-Mortgage-and-Housing-Examiner.

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Filed under: Mortgage Rates, ,

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About Us

As a Russian-speaking South Orange County team and residents of 20 years, Nick Bublik, REALTOR®, & his assistant, Irina Bond, are qualified and committed to guiding their clients through the real estate buying and selling processes with utmost loyalty and a wide range of experience.

Committed to providing exceptional service in each of their endeavors, Nick & Irina are passionate about helping each client reach their real estate goals. Through organization, dedication and perseverance, they deliver on their promises and facilitate results, no matter how complex the circumstances.

Together, Nick & Irina promise real estate transactions that exceed expectations.

Nick Bublik, REALTOR®
(949) 233-9304
Irina Bublik, Assistant
(949) 939-7831
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