Questioning "continued" low interest rates

[DHSmith]

I find it ironic that the news media continues to state the interest rates are still at an all time low. To the consumer - it may appear this way - but do they truly understand the advertisement or have the knowledge of how his/her individual rate is determined. In my - personal - opinion the rates are going up. To my knowledge, when my husband and I were refinancing in 2019 - and shopping for a good rate the loan officer provided some information on how its company determined the rate provided. [Being an experienced closer - I understood most of the process.]

1. The credit rating of the individuals.
2. Are you willing to buy down the rate (pay discount points - which is prepaid interest)
3. The loan length (10 yr., 15 yr., 20 yr., and 30 yr.)

These were the primary considerations.

Back in December of 2019 - this was what was available to us (borrower) with excellent credit rating;

2 1/4% - 0 discount points - 30 years.
1.99% - 1 discount points - 30 years
1.5% - 2 discount points - 30 years
(Think about how often do you find that you actually carry your loan for 30 years; do you ever refinance so that you can take cash out for remodeling - or maybe other expenses; are you actually going to have the home for 30 years)

As a closer, and reviewing the CD - I watch the interest rate of the borrower - and the CD shows if the borrower is paying discount points. This is how I personally do my market watch. Of course, this is “never” discussed with the borrower - this is just how I watch the market.

Early 2021, I did not really note any change. Mid 2021, I noted interest rates go up to 3.25% with 0 discount points. Late 2021 (fall) - I noticed interest rates 3.75% with 0 points (or 3.25% with 1 point). Now, spring of 2022 the closings have been 4.25 with 0 points (3.75% with .75% points; 3.25% with 2.0% points).

Note in Fall of 2020 rate 2.25% with 0% points - now 2022 4.25% with 0 points. When we refinanced in 2019 we lowered our rate from 3.75% to 2.25% with 0 points.

How can they say the rates are at a all time low?

I know many receive advertisements to refinance at a low rate (we do). My husband hands the advertisement to me, and in fine print the rate is based on “paying” discount points (which is a percentage of the loan amount).

In my opinion, that is one of many reasons that our industry is slowing, as the interest rates are going up - and are not in an all time low.

Any thoughts?

[Bobby-CA]

Following the Federal Reserve’s widely expected interest rate hike Wednesday, the housing market will likely see an impact in the form of higher mortgage rates. Though mortgage rates do not follow the federal funds rate, they do typically follow the yield on the 10-year Treasury. Following the Fed’s announcement, the 10-year Treasury yield spiked as high as 2.246%, its highest level since May 2019.

According to the Mortgage Bankers Association, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.27% from 4.09% for the week ending March 11, with points rising to 0.54 from 0.44, including the origination fee, for loans with a 20% down payment. Applications to refinance a home loan fell 3% from the previous week and were 49% lower than the same week a year ago. (hence, NO notary work on refi’s )

In my opinion, here’s what’s ahead: Short sales, loan modifications, forbearances and lots of sales by homeowners who simply cannot weather the inflation storm and coming recession. Such homeowners have plenty of equity but not enough cash to make their bills and they will either try to get a HELOC (which will be very difficult because the banks got burned on this in the last recession) or these folks will likely sell their home, move into something more affordable (if they can find it) or become reluctant renters for a while. Very sad, but it probably will happen, in my view.

What does all that mean for notaries? Well, those of us who survive this sudden but predicted downturn will be handling different kinds of real estate transactions and we’ll be competing for that work with escrow company in-house notaries that are struggling to say alive and relevant.

Have you noticed that everyone is cutting costs, cutting service, raising prices, gouging in some instances, behaving like it’s every man for himself? Our society has changed before our very eyes in the last 2 1/2 years and it’s not going to improve for quite a while. Trends like this never do.

As a notary, I am reinventing myself, re-doing my business plan, changing my marketing approach and going after GNW. Personally, I am paying off debt, saving as much cash as possible and not spending much for a while. I’ve been around long enough to have seen/lived this all before (1980-81,1987-89, 2002, 2008) and I’m not getting sucker-punched again. My advice: see the landscape for what it is and plan accordingly.

[VIPnotaryCO]

@Bobby-CA

I am paying off debt, saving as much cash as possible and not spending much for a while. I’ve been around long enough to have seen/lived this all before (1980-81,1987-89, 2002, 2008) and I’m not getting sucker-punched again. My advice: see the landscape for what it is and plan accordingly.

Thanks for the reminder. And if you plan this right you can sit and wait for the crash and grab some good real estate deals! Yikes!

[alice2uworld]

Check out tv station CNBC (stock market station). They pretty much talk about interest rates daily and give their educated guess on interest forecasts. Usually they are right on the money.