Rates on 30-Year mortgages highest in 11 months

What I would like to start this post off with is saying this; it looks like there may be a ray of hope for mortgage bonds. Yesterday we saw them get a foothold- and we might see the first improvements in five weeks moving forward.

Many of our clients have heard me talk about the dissapointing state of bonds, and in turn rates, these past weeks.

Here is an article by Martin Crutsinger, Associated Press, summarizing recent events:

"WASHINGTON — Rates on 30-year mortgages rose for a fifth straight week, hitting the highest level in 11 months as prospects dimmed further for possible rate cuts from the Federal Reserve.
Mortgage giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 6.74% this week. That was up from 6.53% last week and marked the biggest one-week rise in 30-year rates in more than three years.

The five consecutive increases have pushed 30-year mortgages to their highest level since they were at 6.80% for the week ending July 20, 2006.

"Mortgage rates moved sharply upward this week," said Frank Nothaft, Freddie Mac's chief economist. "These moves parallel rising yields on Treasury securities as concerns about inflation pressures and continuing strength of consumer and business spending have dimmed hopes for an interest rate cut."

The benchmark 10-year Treasury bond hit a five-year high of 5.295% on Tuesday, sending tremors through Wall Street as investors worried that rising interest rates could further depress the housing sector and also harm corporate profits.

All mortgage rates tracked by Freddie Mac showed increases this week.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, rose to 6.43%, up from 6.22% last week.

Five-year, adjustable-rate mortgages averaged 6.37%, up from 6.24%.

One-year, adjustable mortgages rose to 5.75%, up from 5.65% last week.

The mortgage rates do not include add-on fees known as points.

Thirty-year and 15-year mortgages each carried a nationwide average fee of 0.4 point. Five-year, adjustable mortgages carried a fee of 0.5 point while one-year ARMs had a fee of 0.7 point.

A year ago, rates on 30-year mortgages stood at 6.63%, 15-year mortgages were at 6.25%, five-year adjustable-rate mortgages averaged 6.23% and one-year ARMs were at 5.66%."

Fine Print: Points May Be Included

Bankrate: Read the fine print

There are a lot of things that I do like about Bankrate. The layout is very user friendly and they have an informational section called 'Mortgage Basics' that I think is spot on.

Most importantly, I like the concept. Their tag marketing line is "Comprehensive. Objective. Free." I am passionate about educating people on the Mortgage Market and was very optimistic about a 3rd party publishing accurate information about what rates and lending packages would be available based on daily and weekly market values.

'Objective' to me (and the dictionary) means unbiased, or based on facts. Unfortunately, what I am finding on this side falls well short of objectivity: I have found the current incarnation of Bankrate misleading and advertisement driven.


Rates quoted on Bank Rate can only be attained by purchasing points; opening the door to bait-and-switch tactics used by many brokers and lenders. Also- I tried to use a rate comparison tool they offer. Instead of comparison results, I was introduced to advertisements from companies such as 'Lower My Bills' and 'Amerisave'.

Examples:

Bankrate posts a 'National Mortgage Rates' section. At a first glace I would expect it to reflect somewhere around a rate I could expect if I had relatively good credit:

What visitors see is a 6.09% average rate on a 30 yr fixed mortgage. For those of us who keep a constant watch on mortgage bonds we know a few things:

In very small light print it says "Rates may include points.' The misleading part is that it should read as 'These averages include points.'

Today- a rate of 6.09% would be possible if:

You paid about 3-4 points (3.4% of your mortgage loan amount), had a credit score of 700, and put 20% down.

Mortgage rates are based on mortgage bonds- period. The best rate available today if you have a down payment, great credit, is about 6.375%. If a bank had no employees, no phones, no Internet, and no office (eg- no overhead expenses) they might be able to give to a rate at cost: about 6.125%- but they'd have a heck of a time calling or emailing you with terms.

This is misleading and sets unattainable expectations. An honest broker would not try to offer you a rate of 6.09% without disclosing that you would have to pay about 2 points

If they had been objective and posted the national rate average that the average consumer closed with (all credit scores, all down payment scenarios) we would be looking at a number much higher.

But brokers can submit any percentage on a Good Faith Estimate and can offer any percentage they can dream of: Because rates can be purchased with points. Because the lowest rate offer has a chance of soliciting business. Because there is a time line on when you have to sign paperwork on the property you would like to purchase, and if a higher rate and previously undisclosed fees appear on your closing loan documents right before your house closes- chances are you will sign anyway. Because so much has been invested up until that point.

If Bank Rate truly was objective, they would post an average rate that consumers closed with, and alert their visitors to carefully question companies and brokers posting low rates to solicit business.

What seems to always get in the way of objectivity is often the need to generate revenue. Bank Rate, like any company, has to make money themselves. Maintaining a website takes a team of developers, and strategic marketing so that you know who they are and how to find them.

The question, 'Who is paying the bill' seems very apparent when you try to use any comparison tools offered on the site. For instance- 'Compare Mortgage Rates' provides you with a nice advertisement with each question you answer to produce your quote.

It's difficult to provide truly objective information when someone with a very specific agenda is paying your bill.

This post is not meant to tear Bank Rate to pieces- the concept is terrific and badly needed for people looking to compare mortgage loan companies. But the end product is misleading, and I fear possibly damaging. Even since legal action has been filed, it seems that Bankrate seems to be a sound off for bait-and-switch business tactics.

Many of our clients are putting everything they have into this very important investment. There is no room for higher than expected monthly mortgage payments due to unforeseen rate increases and fees disclosed only in the 11th hour. We give good faith estimates that include worst-case-scenario rates and expenses so that they are informed, prepared, and protected at the closing table- no surprises.

We believe that this is the way it should be and look forward to the day when this is made a standard practice within our industry.