Finance -
Mortgage Interest Rates Rise and Then Tumble In The Midst of Uncertain Economic Times
Ki Gray
Ki is a real estate agent in Austin Texas. He works with buyers interested in investing in the Austin real estate market. His site provides a free search of the Austin MLS as well as a graph of recent mortgage interest rates. 
By Ki Gray
Published on 10/28/2008
This article looks at what is happening with mortgage interest rates this week.

So I imagine many people are breathing a sigh of relief this week. Last week mortgage rates made one of the largest one week jumps in the last 20 years. 30 year rates rose from 5.94 to 6.46 for over a half point increase. I thought that rates would drop this week since typically after a large move rates readjust in the opposite direction. But instead of a small readjustment rates tumbled back almost to the same position they were at last week. After going from 5.94 to 6.46 last week 30 year rates came back down to 6.04. We saw the same basic thing with 15 year rates. Last week they jumped from 5.63 to 6.14 and this week they fell back down to 5.72. Here are rates for the last 4 weeks for the different mortgage products.

October 23, 2008
30-yr 6.04 15-yr 5.72 5-yr ARM 6.06 1-yr ARM 5.23

October 16, 2008
30-yr 6.46 15-yr 6.14 5-yr ARM 6.14 1-yr ARM 5.16

October 9, 2008
30-yr 5.94 15-yr 5.63 5-yr ARM 5.90 1-yr ARM 5.15

October 2, 2008
30-yr 6.10 15-yr 5.78 5-yr ARM 6.00 1-yr ARM 5.12

The one mortgage product which seems to be operating in its own world is the 1 year arm which rose for the third straight week. As can be see above while 30 and 15 year rates are above what we saw 2 weeks ago they are both below rates we saw 3 weeks ago. Also it's interesting that for the first time since 2005 (which is as far back as I have data on 5 year arms) the rate for a 5 year arm is higher than the rate on a 30 year loan.

Ok rates are one thing but let's see what all these rates mean for a monthly mortgage payment. Using our free mortgage calculator we translated the rates into a mortgage payment for a 200k mortgage. We looked at rates for the last 3 weeks.

October 23rd
30-yr 1204.24
15-yr 1657.60
5-yr ARM 1206.82
1-yr ARM 1101.93

October 16th
30-yr $1258.87
15-yr $1702.87
5-yr ARM $1217.16
1-yr ARM $1093.28

October 9th
30-yr $1191.39
15-yr $1647.99
5-yr ARM $1647.99
1-yr ARM $1092.05

As rates jumped up two weeks ago and came down this week we are seeing the same thing with mortgage payments. What stands out is that on a 30 year 200k loan the payment came down from 1258.87 to 1204.24. So if you got a loan last week it might be worth seeing if you can relock at today's lower rates. Additionally, if you inquired about refinancing last week and found it was not worth it might be worth it to check again.

If you are looking at getting a mortgage the first obvious takeaway is to avoid the 5 year arm. With rates on a 5 year arm there is basically no reason to not get a 30 year mortgage. Even if you think rates are going to drop dramatically over the next year it probably makes more sense to get a 30 year with no points and simply refinance if rates drop more.