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Weekly Interest Rate Update
On Thursday, the average interest rates on 30-year U.S. mortgages
rose for a ninth straight week, hitting their highest level since
September 2003, according to Freddie Mac.
"We expect mortgage rates to continue to rise gradually over
the next 12 or so months. Because the housing sector is so sensitive
to fluctuations in interest rates, this will have the effect of
returning the housing sector to a more normal pace of activity,
by historical standards," Frank Nothaft, Freddie Mac vice president
and chief economist, said in a statement.
Editor: Freddie Mac is a mortgage finance company chartered by Congress
that buys mortgages from lenders and packages them into securities
to sell to investors or to hold in its own portfolio.
Central bankers generally peg a neutral federal funds rate, one
that neither spurs nor slows growth, somewhere between 3.5 percent
and 5 percent. Last week, the Federal Reserve Bank raised its target
federal funds rate to 4 percent, the highest level in over four
years.
Many analysts now see the central bank boosting the federal funds
rate as high as 5 percent. Editor: This will push mortgage rates
higher across the board.
The increase in the federal funds rate has affected adjustable
rate mortgages to a greater degree than the 30 year fixed mortgage,
so now is still a good time to lock in a 30 year fixed mortgage.
In the Spotlight
Home Equity Line of Credit (Heloc)
We have access to a Heloc that is offering Prime Rate minus .50%
(Prime rate is 7.00% minus .50% equals 6.50%). This Heloc also has
a feature which allows you to lock in a portion or all of your existing
balance into a fixed rate. This is useful for amounts you may not
pay-off in the near future, especially since it is widely expected
the Federal Reserve will raise interest rates by another .50% before
Federal Reserve Chairman Alan Greenspan leaves office in January
2006.
Editor: If you have an existing Heloc, take a
look at your current interest rate. Many Helocs are at Prime plus
1% to 3% bringing the current interest rate to 8% to 10%.
Another advantage of this loan is when rates go back down you will
have an equity line at Prime minus .50% which is a great rate on
a home equity line of credit!
Call (760-310-6988) or email
me if you would like to see if you qualify for this excellent Home
Equity Line of Credit.
Mortgage Analysis
Mortgage strategies for a rising interest rate environment
Two of three mortgage loans used to buy homes in California in the
first eight months of 2005 were adjustable-rate loans, and more
than 80 percent of those loans were interest-only loans, according
to Loan Performance, a unit of data provider First American Corp.
The interest rate on the 30 year fixed mortgage is still very low
in relation to the current federal funds rate of 4.00%. If you are
one of the 66% who have an adjustable-rate mortgage, take this opportunity
to do some financial planning. Review your loan documents to see
when the first interest rate adjustment is and the minimum percentage
adjustment. Then discuss the length of time you plan to own your
home. If your loan will adjust in less than 5 years and your time
horizon to own your home is greater than 3 or 4 years, it’s
probably in your best interest to refinance today, from your adjustable
rate mortgage into a fixed rate mortgage or a hybrid adjustable
rate mortgage.
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This weekly interest rate update newsletter
is offered to you courtesy of Peter Gooler, Sr. Mortgage Consultant.
I’m available via phone (760-310-6988)
or email to discuss your
individual situation.
Have a great weekend!
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