I’m Sean Reynolds from Summit Properties Northwest and Reynolds & Kline Appraisal and today I have with me Mr Dan Chapman of Fairway Independent Mortgage. We’re going to do a quick video here on interest rates. So Dan, tell us where are interest rates right now today, we are February 7th, 2018, on a typical residential home, what are you looking at for an interest rate loan? So conventional loan, primary residence, right now rates are around four and a quarter to four and a half percent for most people with a decent credit. So that’s where they’re at right now and I, you know, rates are going up so they’re slowly starting to go up. We’re in a bare market for interest rates right now. First time it’s been that way in a few years. And what’s causing the interest rates to rise at this point in time? Well, the number one thing that’s causing rates to rise right now is the Federal Reserve is doing what’s called tapering of mortgage backed securities purchasing.
So they’re not going into and buying as many as they used to and they’ve said they’re going to do that. So each month they’re going to do a little bit less purchasing of those and a little bit less of mortgage backed securities, which is where the Fannie Mae and Freddie Mac bonds are traded and the 10 year treasury as well. So they’re not buying as much treasuries. Those are the two places where traders are trading to make rates stay low. And when they put money into those two vehicles, um, rates go down. When they pull money out and they sell rates go up and that’s what’s happening right now is they’re selling and they’re not buying. So the bottom line to the typical consumer is the interest rate on any kind of mortgage is going up, how much of a bump up of have we seen? Like what, what’s the current trend?
Yeah, over the last 30 days, rates have gone up about a quarter percent, a little faster than I like to see. And what does that translate to as far as dollars on say, I don’t know? What would be a good measure? 100,000 dollar loan, $250,000 loan? How’s that impact a buyer? Yeah, you know, on a, on a, on a typical $250,000 loan. If rates were to go up, say a half percent, which, um, you know, they’re going up a half percent from, you know, they’re going to go up half percent from at least where they were in November because we’re already up a quarter percent and they’re going to, I think they will go up another quarter percent. And where we in November? Uh 3.8 – 4 percent, hair under four, right around there. And so rates, um, you know, on, on a $250,000 loan at a half percent, that’s about $75 a month. So on a $500,000 loan, that’s about $150 a month.
If rates go up a half percent, um, you know, and IC rates, you know, by the end of this year, possibly being as high as five percent. Um, you know, it’s a huge bomb. Yeah. Yeah. I’m hoping to stay under five, like, 4, 4.75. But, um, I think for sure we’re going to see 4.75 by likely, more likely by the end of this year and maybe five percent. And another huge impact this has on the consumer is the, like the first time home buyer’s ability to qualify. Every time that interest rate bumps up, their ability to borrow basically goes down, it goes down. I mean, they could qualify right now maybe for $50,000 or more in purchase price, whereas, you know, in six months from now that 50 grand maybe gone because the rates went up. So what are you recommending to like your first time home buyers right now?
What, what are you telling them? What are you coaching them to do? I always do a buy versus rent analysis for them on a spreadsheet and they look at that. Typically they’re, they’re blown away. They had no idea of the benefits of all the different benefits that it lists a, that’s another video topic. But, um, that’s what I do and I go over them, you know, the benefits of home ownership and equity appreciation and principal pay down, you know, tax benefits, um, and then talk about rates and here’s where the rates are at now. If they go up a half percent, what would your payment look like? You know, not including appreciation in the home because values are still going up. And so is everybody else in the mortgage industry, is everybody pretty much on board with the concept that rates are going to go one way at this point in time and that is probably up? Those originators that pay attention to that and don’t just lock loans when they get them.
Like myself, I subscribed to a service called rate alerts. Pretty detailed. Um, I see that on some of your posts. Yeah. Yeah. It’s like a direct feed. It’s a, I actually have a live screen screen up all the time of the mortgage backed securities and see how they’re trading. So I know if we’re going to get a rate change, sometimes we’ll get a rate change during the day. Today we got a price for the worst today. Pricing went up, pricing went up from this morning’s rate sheet that came out, it went up. And I’ve seen some of your posts where you’ve said, hey, based on this feed, here’s the information, this is what’s going on. Yeah, I try to post that at least once a week to let people know, here’s, here’s what’s happening with mortgage rates. This affects your pricing, know when to lock a loan, knowing when to lock a loan can save people thousands of dollars.
Well Dan, thanks so much for joining with me today and shooting this quick video, I just wanted to get an idea of where rates are, where they’re headed, what consumers can expect. And so we at the end of this video, we’ll post your information if buyers out there or if real estate brokers out there that have mortgage related questions, they’ll have your information to reach out to you. But, um, thanks so much for joining today and I appreciate the information. Thank you for having me. I’m Sean Reynolds from Summit Properties Northwest. Dan Chapman from Fairway Independent Mortgage. Will see on the next video. Thank you. Bye.