The Mortgage Bankers Association reported mortgage application volume down 12 percent last week when compared to two weeks earlier. Clearly the year-end holidays and a dearth of refinancings were major factors but we don’t want to lose sight of the 80 basis point move in rates since the November election. Rates have pulled back a bit — 15 basis points — since the highs at the end of the year but this feels like a short respite before interest rates begin to move higher. Graph: 30-year fixed rate mortgage loan rates for the last three months.
That said, interest rates continue to be extremely attractive from a historical perspective. Current mortgage rates span (approximately) from 4.15% APR for a 30-year fixed rate to 3.125% APR for a 7/1 ARM. To put this in perspective 30 year rates over the last five years have traded 50% of the time above the 4.15% level. During the last five years interest rate levels have traded as high as 4.6% and as low as 3.4%, averaging roughly 4% during that five year period. Graph: 30-year fixed rate mortgage over the last five years ending 2016.
Investors still have a great opportunity to lock-in very attractive money. Most investor’s time horizon is between seven and ten years. 7/1 ARM APR is hoovering around 3% with a slightly longer 10/1 ARM mortgage with an APR of 3.3%.
Historically, the 10/1 ARM is trading near its low and offers the investor very attractive funding for 10 years allowing the neighborhood/building to mature and offering the investor an opportunity to refinance or trade out of the equity in the building/apartment. Graph: 10/1 ARM Mortgage Rates over the last five years ending 2016.
If you have questions with respect to financing a residential purchase or investment, please contact Brian Meier at 212.500.7054. He and his team can answer your questions and assist you with making a good financial decision.