Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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Increased Interest Rates Spark End Refi Boom

Refi Boom May be Nearign the End of the Road

Refi Boom May be Nearign the End of the Road

Orange County, CA – Word on the street is very clearly that interest rates are going to rise in 2013. We can’t be sure of this, but the economic data points in only one direction. Naturally this is a purchase signal to home buyers everywhere. The longer one waits before buying, the more likely they are to receive a higher interest rate on their mortgage.

Freddie Mac’s survey from last week suggested that the national average interest rate for 30 year fixed mortgages was sitting at 3.34%. This incredibly low figure is only fractionally higher than the record low figure which we saw in late fall. It has to be noted though that the Mortgage Bankers Association does not believe that we will continue to experience rates like these.

The Mortgage Bankers Association expects a blanket rise up to around 4.45% within a year on 30 year fixed mortgages, marking a more than 1% increase. This is a rise which would have a major impact on buying power, and it has to be assumed that this could bring to an end the longest Refi Boom in recent times. In fact, as noted in the Yahoo article above, the Mortgage Banker’s Association predicts a 76% decrease in refinances year over year.

The rise in interest rates would affect purchasing power to the tune of 14.4%. A homeowner’s buying power decreases 14.4% as it costs more to borrow the same amount of money. A homeowner seeking a $417,000 loan amount would pay principal and interest of $1,835 at the present rate. But if they were to calculate the same loan on the projected rates from next year, the payment would be $2,100 each month. This could significantly damage the buying ability of some families.

Gauging the market is a tough thing to do in volatile markets such as today’s. And trying to time it just right is more like a game of chicken. No one has a crystal ball to predict what the markets will do exactly on any given day or week. But a key benefit that PrimeLending can offer is the Float Down (Link) Option. This option allows homeowners to lock their interest rate right away. A rate lock protects the borrower against any upward movement on interest rates. But once their loan is approved a float down window is opened. If the market has dropped and interest rates have improved by at least 0.125% on their program, then we’ll float your rate down at no additional cost. It has saved many of my clients a considerable amount. Although rare, a few of my clients have reduced their rate by 0.375% just prior to closing.

Contact me to learn more about market trends or to find out more about our Float Down Option.

Scott Storace

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