US Bank 30 year mortgage rates

[tulak]

I already locked elsewhere, but when looking around after the fact - I really shouldn't do that - bankrate showed us bank, which at the moment has some really good 30 year rates: 4.25% with 1% origination and .875% discount.

Here's a link to their site:


Today's Mortgage Interest Rates

 

[tryan]

Very bizzare ... the 30 year rate is lower than the 15 year !?!? Never seen that before.

Wouldn't investors borrow long term and lend short term to pocket the spread .... can't lose.

Need brewer to weigh in here ....

 

[ziggy29]

Very bizzare ... the 30 year rate is lower than the 15 year !?!? Never seen that before.

Need brewer to weigh in here ....

Very odd. Why would anyone choose the 15, assuming no prepayment penalty?

 

[samclem]

Doesn't anyone think inflation is going to go sky-high once the wad of govt-injected bailout money (already approved and more to follow) gets into the economy? Locking in 30 years at less than 5% is tempting, especially if inflation tops 5% for a decade.

Must resist impulse to speculate . .take the sure thing . . . keep my present 5% 12 YR mortgage . . . you aren't smarter than the market . . . must watch a movie until this urge passes. . .

 

[clifp]

Doesn't anyone think inflation is going to go sky-high once the wad of govt-injected bailout money (already approved and more to follow) gets into the economy? Locking in 30 years at less than 5% is tempting, especially if inflation tops 5% for a decade.

Must resist impulse to speculate . .take the sure thing . . . keep my present 5% 12 YR mortgage . . . you aren't smarter than the market . . . must watch a movie until this urge passes. . .

Come on Sam you are pilot, thinking of building your own plane, compared to that risk speculating on interest rates is nothing...

Plus the good news is enough of us on the ER forum make the same bet and it goes bad, we can get a bailout from Uncle Sam

 

[saluki9]

Very bizzare ... the 30 year rate is lower than the 15 year !?!? Never seen that before.

Wouldn't investors borrow long term and lend short term to pocket the spread .... can't lose.

Need brewer to weigh in here ....

A couple of possible reasons.

1. Banks adjust their rates to encourange and discourage business. That's why you will find several of the largest banks still have their mortgage rates in the 6s. So if US bank is trying to lighten up on 15 year mortgages they can just raise the rate above the 30.

2. I've never been interested enough to research it, but I've heard some rumors about how 15 year mortgages tend to have a longer average life than 30s based on the conservative nature of people who tend to take 15s in the first place.

 

[laurence]

I started a thread earlier on that disparity (30 vs. 15) and we all basically concluded, "it's a mad world". The splashy low rates all have enough fees to make it not worth it for my 5.125% 20 year.

 

[brewer12345]

Very bizzare ... the 30 year rate is lower than the 15 year !?!? Never seen that before.

Wouldn't investors borrow long term and lend short term to pocket the spread .... can't lose.

Need brewer to weigh in here ....

There are large distortions in the conforming fixed market right now. Banks generally do not keep any of these long maturity fixed loans (a few unusual lenders aside). The originate and immediately dump the loans off to Fannie and Freddie. They get some fees, a point or two up front, and the right to service the loan and collect some fees over time. So what drives rates on these loans is the pricing/yield on various flavors of Fannie and Freddie-backed MBS. So what drives that yield? In normal times, it is usually based on treasury yields plus complicated modelling/assumptions about likely prepayment behavior of the underlying loans. In the past year or so, it has also been driven by market doubts about Fannie and Freddie as well as forced delevering by market participants holding these securities (and yields went higher along with mortgage rates).

Right now, we have a very low treasury rate level and a slowly healing credit market, which is pushing MBS rates down. Even more, the Fed is out in the market buying $3 or $4 billion per day (!) in fixed rate agency MBS. The market knows this and is reacting, with investors getting a little bolder about buying themselves and lenders being more willing to originate loans. But the Fed is only buying fixed rate MBS, not ARM-backed MBS, so in many cases 30 year fixed rates are lower than 5 year ARM rates in an environment where there is significant steepness to the treasury curve. This is a "beyond the looking-glass" environment and it is tought to figure how long it will last or what comes next. So if you are sitting on an ARM or considering a refi, do it in the next 3 to 6 months if it is critical for you, since who knows what comes after.