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3.75% 30 year fixed.. with no points or fees... how low can we go?


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2011 Dec 15, 2:12am   8,117 views  15 comments

by LAO   ➕follow (0)   💰tip   ignore  

How low can mortgage rates go for 30 year fixed? Just a few years ago a 3.75% rate would have been low for a 15 year fixed mortgage!!

If inflation rose to say 5-6% a year... Wouldn't locking in a 30 year fixed at that low of rate be like free money?

(assuming you can keep your job and have enough to pay for other inflated expenses).

#housing

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1   StoutFiles   2011 Dec 15, 2:47am  

Not much lower. Which is why we'll be sitting on this rate for a while. Rates could rise, but house prices would take a big fall. Too many homes in the shadow inventory for the banks to take a hit there.

2   FortWayne   2011 Dec 15, 2:55am  

As long as HAMP is paying mortgages for underwater owners nothing will change. Change only happens when doing nothing hurts more.

3   peteym80   2011 Dec 15, 2:57am  

Yes...locking in a cheap rate is a good thing, but unfortunately you pay for it via...higher home prices. Remember, you can always refinance to a lower rate. You can never refinance to lower your principal balance. If you have cash, it is better to buy in a higher interest rate environment and much lower prices then eventually refinance to a lower rate later so you have the best of both worlds:
1. Low principal balance
2. Low rate
3. Money straight to your pocket!

4   TPB   2011 Dec 15, 3:31am  

God willing we will get to the point, where "ANYTHING", is better than this.

5   toothfairy   2011 Dec 15, 4:04am  

peteym80 says

If you have cash, it is better to buy in a higher interest rate environment and much lower prices then eventually refinance to a lower rate later so you have the best of both worlds:

The problem with that is that rates and prices tend to go up at the same time in response to a stronger economy.

6   peteym80   2011 Dec 15, 4:14am  

I don't think the economy is getting stronger anytime soon. With high unemployment, high underemployment, decreasing incomes, increasing in food stamp participation, increasing student loan debt and very low GDP growth forecast, you can probably bet the rates won't climb up quickly. I have been waiting late 2010 to buy, but I am going to let the banks carry the cost of my future house for now and let prices come down to levels that are sustainable to the incomes generated in the area.

Once prices are within reasonable debt/income and price/income values in addition to rental parity...I might make my move. Until then, I don't mind saving money. If rates go up now, I am pretty sure prices will go tumbling down with the rates. Remember average median income has been coming down since 1999. Now if incomes go up and become sustainable, that is a different story.

7   Mr B   2011 Dec 15, 4:26am  

If we officially had a bottom today, then everyone would want to buy. The problem is that people are afraid they will loose money over the next few years. I am sorry people but homes will not go down forever. Rents have been sky rocketing up all over the US. Investors will purchase a home and rent it out to make a profit. I hope people will not complain about rents after all this mess is over. Listen people, purchased when prices and interest rates are low because it will not last forever. If you loose say 10% over the next 3 years you win over the long term because stagflation is coming!

8   David9   2011 Dec 15, 5:00am  

StoutFiles says

Not much lower. Which is why we'll be sitting on this rate for a while. Rates could rise, but house prices would take a big fall. Too many homes in the shadow inventory for the banks to take a hit there.

Hey, I just needed to go to a teller at the bank and I jokingly asked "So, when is so and so bank going to liquidate their housing inventory" She laughed out loud and said: "Well, everyone wants to know that"

9   PockyClipsNow   2011 Dec 15, 5:55am  

Rate are already lower than this. If you get a federal loan mod(hamp?) then they will drop the rate to 2% fixed for 5 years (yeah i know its an ARM but when you are undawata it doesnt matter)

I heard of a lady that got a federal loan mod when she went on disability to have a baby. Yes its that crazy! When the feds control the free money machine they are givin free shit away by the trillion.

10   LAO   2011 Dec 15, 6:36am  

peteym80 says

Yes...locking in a cheap rate is a good thing, but unfortunately you pay for it via...higher home prices. Remember, you can always refinance to a lower rate. You can never refinance to lower your principal balance. If you have cash, it is better to buy in a higher interest rate environment and much lower prices then eventually refinance to a lower rate later so you have the best of both worlds:
1. Low principal balance
2. Low rate
3. Money straight to your pocket!

I agree that makes sense.. People that bought in 1996 are sitting pretty right now... As long as the didn't take out tons of home equity loans in the insane bubble... Then a person who bought a home in my neighborhood for say $200K in 1996 at 8% interest... 15 years later... could refinance a good chunk of their 30 year mortgage at the high 3% range...

I wonder what all the people that bought in the late 90s in Los Angeles are doing with the stockpile of money they should theoretically be saving upon the opportunity to refinance?

The question is... will interest rates rise back up to 8-9% and fall back down to 3-4% in the next 30 years?!

if you look at rates over the last 15 years they have only declined steadily...

If they ever rise again... then they will probably rise steadily for 15+ years.. so it may not be as easy to ever refinance in one's lifetime at a 3% interest rate.

11   tdr   2011 Dec 15, 6:39am  

And I thought we did pretty good with a 30 year, no lender fee/points for 3.99%. We locked in early November though.

12   grywlfbg   2011 Dec 15, 8:06am  

Mr B says

If we officially had a bottom today, then everyone would want to buy. The problem is that people are afraid they will loose money over the next few years. I am sorry people but homes will not go down forever. Rents have been sky rocketing up all over the US. Investors will purchase a home and rent it out to make a profit. I hope people will not complain about rents after all this mess is over. Listen people, purchased when prices and interest rates are low because it will not last forever. If you loose say 10% over the next 3 years you win over the long term because stagflation is coming!

Rents always go up, now is a great time to buy! Err, not. If the economy turns down rents will crash and all those "super smart investors" will lose their shirts. In the Bay Area after the tech crash places were renting for 1/3 of their previous prices - if your investment can weather that kind of price fluctuation then you will do fine. If not.....

13   JodyChunder   2011 Dec 15, 5:22pm  

yeah just three year ago all you read about was how the renter was king. i will tell you now that them days are over. rents are going up up up. $$$$ now is a dam good time to be a property manager.

14   JodyChunder   2011 Dec 15, 5:27pm  

David9 says

Hey, I just needed to go to a teller at the bank and I jokingly asked "So, when is so and so bank going to liquidate their housing inventory" She laughed out loud and said: "Well, everyone wants to know that"

this way of things will keep on for at least 20 years according to my source. every one wants to think its just 1 more year just 1 mor eyear. no sir, i will be dead or in diapers before i ever seen normal again that is for sure.

15   EastCoastBubbleBoy   2011 Dec 20, 8:51am  

For my personal situation, rates this low make buying a cheap fixer upper more and more appealing. Rates making the prices easier to justify. Problem is taxes are still high, at least around here.

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