Weekly Rate Update - 2/27/2006
Mortgage rates were virtually unchanged over the past week. There was a mixed bag of news which led to a stabilization on the bond pricing front. The CPI came in and showed that while inflation still continues to be a concern, it was in line with expectations. The Fed released their meeting minutes, confirming that they are indeed concerned with inflation. We should certainly expect another rate hike on March 28th at the next meeting. This will affect home equity lines and loans, but the increase has already been factored into long bond prices.
Internationally, there appears to be some destabilization in many of the oil producing nations. Iraq seems on the verge of civil war, an attempt was made in Saudi Arabia to destroy an oil refinery, and Nigeria continues to see a great deal of violence. This could be bad news both for oil prices and in turn for inflation.
We see that many of our customers here in Atlanta are nearing the end of the fixed rate period of their hybrid ARMs right now. In 2003 many of them refinanced into 3/1 ARM's and they are about to see a signifigant increase in rates within the next few months. Fortunately most 3/1 ARMs have a 2 point cap on the first adjustment, however, this is still going to put many at or above the current rate on a 30 year fixed. And of course in another year, there is the possibility for another 2 point increase.
Now is the time to refinance into a 30 year fixed rate mortgage. Amazingly, rates are still extremely low on the 30 year fixed mortgage. If you are in a 3 or a 5 year ARM, or worse yet in a Pay Option ARM, we highly recommend moving into a fixed rate loan right now.