Here with another segment of Arizona Mortgage News with our resident local mortgage expert, Mike Goblet. What’s happening with mortgage rates today? Well, it’s been an exciting few weeks and actually if anybody’s been watching the news they may have even seen the national news broadcast that mortgage rates have crept up and the numbers are up to 3.81% as a national average for a 30 year fixed rate.
First of all a couple of things to keep in mind when you hear this and in our previous video blogs we talked about mortgage rates were at an all time low. Watch this video to learn more about what the future of mortgage rates is how tomorrow’s job report update will impact mortgage rates.
Talk with Mike at 480‑503‑3533, email him at firstname.lastname@example.org or call his cell, 480‑220‑2329. Mike is always happy to take your call personally.
Matt O’Brien: We’re here with another segment of “Arizona Mortgage News” with our resident local expert, Mike Goblet. Today Mike has some interesting news. It’s showing what’s going on. According to what we talked about, we almost had an on air broadcast last week, when we were going to discuss mortgage rates. Mike has some news on what’s happening with mortgage rates today. I think you should tune in. Mike, enlighten us on this concerning topic.
Mike Goblet: It’s been an exciting few weeks. Actually, if anybody’s been watching the news, they may even have heard on the national news broadcasts that mortgage rates have crept up. The number they use is up to 3.81 as a national average for a 30 year fixed. There’s first of all a couple of things to keep in mind when you hear that. In previous blogs, we have talked about what those numbers mean. First of all, they’re reporting last week, so it may or may not be relevant to what’s happening this week.
Number two, when they quote those national numbers, they quote a number based upon a discount rate of 0.7 tenths of a percent to get to that rate, so, again, it may not be reflective of where people think average rates are. As a matter of fact, they’re not, because most people in my experience won’t pay a discount point to get to a rate.
That being said as a little background, to say that what’s happening in the national news is a little misleading and understates what’s really happening. I wanted to put that in a little bit background for you. Does that make sense?
Matt: It makes a lot of sense. Last week we were talking about the fact that the rates had hit rock bottom. You are 100 percent right. Maybe it was that day that you set the benchmark, and everything has been on the rise since.
Mike: Actually, I think we have seen the best rates. I think they are past for the future. It would take another very dramatic economic turn-down, I think, to get back to where the rates where. That being said, we’re now looking at increasing rates, but let’s talk about that difference and where they are in the short period of time it’s taken. I pulled up some numbers as a comparison. On May 1st, I could do what’s called par pricing, which means no discount to get to that level, but no rebate to pay the closing costs that the lender would give to incent them. We’ve talked about how that works in the past. On May 1st, the par pricing rate would be 3.125 from the lender I’m looking at and comparing to. That’s a really low rate even at par pricing.
In fact, to do a no closing cost loan, again, that we’ve talked about, I could be at 3.5 percent if the loan amount was in about the $200,000 level or amount. I could do a no closing cost loan for 3.5 percent. Today’s pricing, based upon this morning, 3.5 percent would cost two points discount to get to. A par pricing, which on May 1st was 3.125, is 3.875 percent.
Mike: For me to do a no closing cost loan today, again assuming a number of variables, it would be 4.25 percent, or 0.75 greater than what it was on May 1st. Most of this has happened in the last two to three weeks, this big run up.
Matt: If someone’s on an adjustable rate mortgage and they’re at that time-frame, or maybe an interest only loan, should they be concerned about these rising rates? Are we looking at getting to a level…?
Mike: Yes and no. What I mean by that is, obviously they are eventually going to want to get into a fixed rate mortgage. The simple answer to that is, likely the rates are going to be higher than what they were. Even if your adjustment comes to an end in the near future, because those are based upon a different index, the LIBOR I haven’t really seen that move yet the odds are, the impact will not be very strong. In fact, in all likelihood their rate will come down if they took it out five, six or more years ago, because the LIBOR is much less today than it was then.
Matt: I guess that’s good news for all the interest only loans out there.
Mike: For those who are in ARMs that are adjusting, yes, it won’t be a major impact immediately, but eventually those rates can keep rising as much as two percent per year. Keep in mind that longer term, it’s still a disadvantage.
Matt: That’s significant. Where do you see rates going in the next two to five years?
Mike: Even at 4.25 percent, compared to where we were, you go, “Oh my god! It’s up almost a point or more than a point!” The answer is, the historical average is seven percent. We’re still well below historical averages, we’re just not at where the bottoms were.
Matt: That makes sense. It seems like it still is now the time to take advantage of these low rates.
Mike: It is. Here’s going to be a dramatic potential for dramatic change, tomorrow, even. If you check the stock market today, June 5th, you’ll see the stock market is falling behind. It was down over 100 points a little bit ago. That’s because the ADP employment numbers came out weaker than expected. When the stock market starts to fall, the bond market rallies a little bit, so we’re getting a little bit of a rally in the bond market and some support. But tomorrow on Thursday, the employment numbers come out. If they don’t meet expectation, you can expect the stock market to decline even more, the bond market to rally, and rates improve.
If, on the other hand, the employment numbers are better than expected, the reverse is going to happen. Rates are going to get worse, and the stock market will get better. If they meet expectations, then not much changes from where we are, but tomorrow could be a big switch in where rates are immediately for the short term.
Matt: That makes sense. Any other thoughts on this topic?
Mike: Nope. What you have to decide…It’s gambling with your own money on whether you lock or don’t lock at this point. It’s that yield spread money more than anything that forces you to a higher rate. All those other rates are still available. They just now cost money to get to and probably don’t make it worthwhile. Never chase the lowest rate, chase the best program. I’m happy to help show you what’s the best program and how it’s tied to the best rate. Rates are on the rise. How quickly they’ll rise and to what level is determined by the world and US economy.
Matt: Make sense. Mike, if people want to get in touch with you, what’s the best way to reach out?
Mike: You can contact me at our office number, which is 480-503-3533. My cell phone for direct contact is 480-220-2329. Or email me at Mike.Goblet@umfginc.com. Our company initials, UMFG, Inc.
Matt: Fantastic. Some interesting things going on in the mortgage industry. We’ll hold tight and see what tomorrow brings.
Mike: Remember, we’re still at low rates, just not the lowest we’ve been.
Matt: Still a good time to get in touch with Mike. Thanks again for always enlightening us and the good information. Be sure to subscribe to the YouTube channel, and look forward to more good information from the man, Mike Goblet.
Mike: Thanks, Matt.
Matt: Thank you.