October market changes help drop loan rates

The month of October has been a roller coaster ride for the markets. The volatility within the economy has helped to drive home mortgage rates to their lowest levels in the past eight months. October mortgage rates dropped approximately a quarter of a percent from mid September, primarily as investors began growing more concerned that the U.S. stock market may have peaked for the year when it nearly surpassed the 10,000 point level. The rapid rise in the broad markets have not worked to drive up long term interest rates this year. This non traditional market pattern is one of the key reasons interest rates have been so attractive for homeowners to take advantage of.

Most national lenders were offering conventional home loans at or around the five percent range, a drop of almost one percent from its peak in June. The market for Jumbo home loans remains quite challenged as lenders are still having difficulty selling and packaging these mortgage loans into the secondary marketplace. Jumbo home loans remained well above six percent and most national lenders were only offering programs that were eligible under Fannie Mae’s extended guidelines. The days of applying for Super Jumbo loans appear to be a distant memory and may not exist again for some period of time. The lack of demand for mortgage backed loans that are not written to guidelines from Fannie Mae, Freddie Mac or FHA has essentially collapsed the key element in creating secondary financing outlets. To date, most consumers who need a non conventional jumbo home loan will have to turn to a credit union or local bank that is willing to portfolio this mortgage on its balance sheet. There are numerous institutions who still offer this service, but their will be a wide spread with interest rates and fees for these types of mortgages, making the process of obtaining the best rate a bit of a challenge.

There appears to be strong likelihood that rates will remain at attractive levels for the balance of the month for conventional home loans. Comparatively interest rates for jumbo mortgage loans remain attractive to historic rate trends. There is a strong chance we will begin to see conventional home loan rates increase in 2010 and the gap narrow between conventional and jumbo loan financing rates. Homeowners who have the opportunity to refinance can lock in substantial savings with the current market rates and home buyers who have yet to lock into a purchase, can secure a great payment for the life of their loan if they are able to close in the upcoming months with today’s historically low fixed mortgage rates.