Wouldja Believe: 8.5%?

By Dave Fratello | August 8th, 2007
MBC was about to check with a friendly mortgage broker regarding current rates, but lo, Kaye Thomas has already covered the ground quite well, thanks.

In her new post, she warns that jumbo rates are volatile but have been quoted as high as 8.5%, and that's for your 80% LTV 1st.

There's also some question about "piggyback" seconds, both what rates will be, and what the willingness of lenders might be, in the weeks and months to come. Cue Kaye:
The credit market is changing on a day by day basis, Lenders are determining rates on their individual assessment of risk... which means that rates will vary depending on the lender... and no one knows what's happening...

I do know that if this jump in rates for jumbo loans continues over a prolonged period.... and buyers who need those loans are unable to do stated income and/or lenders begin requiring larger down payments.... our market is in big trouble as the buyer pool just shrunk...

Another factor to consider is whether stated income jumbo loans (Alt-A) with less them 20% down are about to disappear. It is a huge possibility and many people who have large incomes are not salaried...

If I were a seller right now I would make darn sure that anyone buying my house was 100% rock solid with a FICO score of 780 or better and a lot of cash.
It's worth repeating (or rephrasing) some things Kaye said – everything is moving, no one knows what's going on, the future is unknown. That is: uncertainty and volatility are taking hold in the mortgage market, as in the rest of the financial markets – for now.

We've seen interest rate fluctuations before. The rates could revert next week.

In the shorter term, buyers without rate locks are going to want to pause. We could lose a few escrows. If the rates stay high, the next logical step is price adjustments.

Remember when some major market leaders called the bottom in the South Bay RE market back in June? They qualified their comments thusly:
Prices are holding steady for the most part and smart buyers have decided not to wait for further downturns, which frankly we don’t think will occur, so long as mortgage rates hold steady.

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