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Beauty of Mortgage News Is in the Eye of the Beholder

May 15th, 2008

Mortgage rates edged lower this week, as the prevailing drift of housing news could be seen as good or bad, depending on the perspective.

In other words, more bad news for homeowners — at least some of them — but good news for potential home buyers.

When You Assume…

May 7th, 2008

If you have an adjustable rate mortgage (ARM) you have probably been bombarded with solicitations and exhortations to “fix it” before rates go sky-high. You are right to be concerned about the future but jumping into the nearest fixed rate mortgage could be a costly move.

Looking at recent ARM rate adjustments tells the story. Rates for many ARM borrowers have decreased lately. Before making any decision about refinancing to nail down a stable rate, get out your loan documents, find the Adjustable Rate Mortgage Rider, and look up the terms of your ARM. Locate the index that your rate is tied to (for example, the LIBOR, COFI, or T-Bill). The index is a published financial indicator and you should be able to look up its value easily online. This week’s 6-month LIBOR, for example, is 2.88%. Next, find the margin that your lender adds to the index to get your interest rate. If your loan is based on the 6-month LIBOR and carries a margin of 2.5%, your rate would be 5.38% if adjusting today.

OK, but what if a lender calls you up and says you can get a fixed loan at 6% right now? Should you go for it?

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Get Results: Government Review of Mortgage Fees

April 22nd, 2008

The Australia Federal Government commissioned investigation into mortgage fees. In their mortgage fee review results, it was discovered that the largest lending institutions charge the biggest fees.

To most consumers it’s not exactly clear what the entry and exit fees are, but currently the average mortgage is refinanced every three years and paying attention to these fees can save a lot of money. So will this review create competition for better consumer options? Well already some banks are offering mortgage products free of exit fees.

Will we get more of these results as these fees are disclosed to consumers?

For more on this see:

Government releases mortgage fees review
Penalised for mortgage loyalty
HSBC lifts mortgage fees for limited period
Mortgage fee review will boost competition: Govt

How Long Can Rate Stability Last?

April 10th, 2008

The significant thing in mortgages this week wasn’t what had changed, but what had stayed the same. 30-year mortgage rates posted their fourth consecutive weekly reading within a range of only 0.03%. 

This stability was not because of a lack in economic news. Among the prominent developments:

Indeed, considering the amount of economic news, the fact that mortgage rates remained unchanged was not because there were no new developments, but more because conflicting developments essentially fought to a standstill.

For mortgage shoppers, this meant good news — additional time to think and act while mortgage rates are still at uncommonly low levels. 

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News Flash: Federal Reserve Makes Dramatic Interest Rate Cut (Again)

March 18th, 2008

In the latest move to both stabilize financial markets and shore up a flagging economy, Ben Bernanke and the Federal Reserve took dramatic action on March 18th, cutting interest rates by 0.75%.

This move is part of a growing patchwork quilt of government economic initiatives which have emerged since year-end. That quilt includes:

  • Three separate Federal Reserve rate cuts
  • A sweeping tax rebate program
  • Extraordinary measures to provide liquidity to financial institutions

The maddening thing about economic policy moves is that it will take months to know how they will pan out. However, while Washington and the heartland wait to see what the results of these stimulative measures will be, one group that should not be waiting is mortgage shoppers. For anyone looking to refinance, and especially for prospective home buyers, the best time to act might be the present.

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