Posted on 09/06/2023 6:04:40 AM PDT by Red Badger
KEY POINTS:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 7.21% from 7.31%
Applications for a mortgage to purchase a home fell 2% for the week and were 28% lower than the same week one year ago.
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After rising sharply for several weeks, mortgage interest rates pulled back slightly last week, but not enough to revive mortgage demand.
Total mortgage application volume fell 2.9% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 7.21% from 7.31%, with points falling to 0.69 from 0.73 (including the origination fee) for loans with a 20% down payment.
“Mortgage applications declined to the lowest level since December 1996, despite a drop in mortgage rates,” said Joel Kan, an MBA economist. “Rates remained more than a full percentage point higher than a year ago, despite mixed data on the health of the economy and signs of a cooling job market.”
Applications to refinance a home loan — which are most sensitive to weekly interest rate changes — fell 5%, compared with the previous week, and were 30% lower than the same week one year ago. The vast majority of borrowers today have loans with rates below 4%. Even with high rates of home equity, borrowers are more likely to take out a second loan to pull cash out, rather than lose their low rate through a cash-out refinance.
Applications for a mortgage to purchase a home fell 2% for the week and were 28% lower than the same week one year ago.
“Prospective buyers remain on the sidelines due to low housing inventory and elevated mortgage rates,” Kan added.
Mortgage rates turned higher again to start this week, and more economic data out in the coming days could impact rates further. While they have moved in a narrow range the past few weeks, 7% appears to be the new normal. This has thrown cold water on home prices, which had been rising for much of the year but which appear to be easing now yet again.
We’ll be paying ours off in a few months and building our new house out of pocket. Can’t wait!
HELOCs are even worse. We did a HELOC about 10 years ago, which looking back, was a mistake. We used it to purchase other property which we had a very limited window to acquire. It had previously been family property but was lost when the person it was given to sold it (and we were caught off guard and unprepared at that time). We didn’t want this to slip by again, so bit the bullet and used a HELOC to get down payment amount (on a second property, they require a 20% down payment). At the time, the rates were very good, but this last 3 years my interest payments have more than tripled. We’ve been tripling up on our payments, and we’re making a big dent, but damn these interest rates!!
“The mortgage holder would often be wise to give a buyer a 4% mortgage for 15 years instead of remaining stuck with a 3% loan.”
An offer any sane person would refuse.
Everyone’s financial situation is different. Everyone really should run the numbers to see what makes sense for them.
Some people refinance and get a lower interest rate as well as a lower monthly payment. That may work for them even if they’re resetting the clock for a 30-year mortgage.
Always a judgement call depending on circumstance. Some folks may not qualify for the higher 15 yr payment or prefer having the extra bit as cash flow. Some just don’t want a lot in equity, preferring to use their money elsewhere.
If you can’t set up your own spreadsheets, you could always look at the amortization schedule and pay 1 extra month of principal, which cuts off one monthly payment at the end of the loan. A small and easily affordable payment, especially in the beginning.
Unfortunately, 99% of the public doesn’t have the math skill to be able to make change, let alone make a sound judgement call that involves numbers.
The SALT limits were one of the smartest things the Republicans ever did. Painted the Dems in a corner because they would be fighting for tax breaks for the affluent if they push to eliminate it.
Also, as you mention, it was used to subsidize blue state BS.
Unfortunately, the SALT limits also turned most wealthy suburban House districts in “blue” states from Republican to Democrat — and most of them have stayed that way ever since.
Refrigerators don’t come in boxes anymore. They have styrofoam protectors on the edges and their shrink wrapped.
That is true, but the flipside of that is it made harder for blue states to just keep raising taxes on them. So while on a national level, some switched to Democrats, it may help turn some states if someone running for Governor wants to lower the state income taxes.
Same here. In Dec 2017, we paid off our 15 year mortgage in 12 years. If we have it to do again, it would have been 5 or 6 years.
Just make sure you’re not invested in an MBS product because they lose money when some uninformed “personal finance piker” pays off their mortgage early or refinances for any reason.
It is amazing how big fund accounts are able to influence the populace into thinking there is such a thing as good debt, and you can be happy in an extended co-ownership of your primary residence with a bank simply to fund other investments. Those other investments, if they are taxable brokerage accounts or managed mutual funds can easily cost 1-2% in brokerage fees and taxes even when they lose value in a down market but don’t tell anyone it is a secret, and no one will believe you anyway.
if one figures the payment on a refi 15 year loan and then ups their current payment on the remaining 25 year portion of the 30 year loan... and makes sure they apply the xtra to the principal... that loan will terminate much sooner... as the principal amount will go down 10’s and 20’s of thousands a year more than the amortization table projects...
the new “low” rate of 6-7 percent people are refinancing into is a real killer...
“It is amazing how big fund accounts are able to influence the populace into thinking there is such a thing as good debt, and you can be happy in an extended co-ownership of your primary residence with a bank simply to fund other investments. Those other investments, if they are taxable brokerage accounts or managed mutual funds can easily cost 1-2% in brokerage fees and taxes even when they lose value in a down market but don’t tell anyone it is a secret, and no one will believe you anyway.”
My “taxable brokerage account” pays 3% in qualified dividends plus appreciation.
Mutual funds can be purchased with zero fees.
ETF’s are available also.
I forgot to post that stock dividends increase each year. Years back they were paying for my mortgage interest. Now they are paying more than the interest.
Ten years ago my ETN paid $1.68 a share in dividends. It now pays $3.44. Meanwhile the stock has gone from 67 to 230.
For married earning less than $100k qualified dividends are untaxed.
Or stick with the 30 year mortgage and just pay an extra $400+ per month to start paying it off early. Then, if your income drops for some reason you can fall back to making only the required payment.
My last mortgage was bi-weekly so that "forced" an extra payment twice a year. At the time, I vowed to make extra payments on my own on top of that but only rarely did. And I consider myself fairly disciplined financially.
With a 15-year mortage, you have no choice but to come up with the extra dollars.
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Ten years
“Mutual funds can be purchased with zero fees.
ETF’s are available also.”
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Not sure about zero fee taxable mutual funds but very low cost index funds for sure. Same with ETFs. The problem of course with managed mutual funds are the fees, taxes, turnover and so forth my point being those who advocate for holding a 30 year mortgage and investing the difference between that and either a 15 year and/or paying off early never seem to offer a real world example of how this actually made them more money than paying the note off, then going all in on investing debt free.
Also, you would never know from reading the critics of someone like Dave Ramsey that he advocates eliminating consumer debt, then putting 15% into retirement accounts, then paying off the mortgage, all in that order.
My 401K has an S&P 500 index fund that I contribute to partical allocation into pre-tax the bulk in a ROTH 401K, that shows a turnover of 3% and expense ration of .015%
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