A Question About Home Mortgage Interest Rates

We're told there's a "credit crunch", that banks are afraid to lend money because they're afraid of defaulting borrowers. In such conditions, the loans that are actually made would have relatively high interest rates, since when risk to the lender is high, or perceived as high, then the interest rate goes up, reflecting a 'risk premium' demanded by the lender. But I just refinanced my home mortgage at 5% for a fixed-rate 30-year loan: a very low interest rate relative to recent history. That looks like free-flowing money to me . . . so why is the bank willing to lend to me at such a low rate during a "credit crunch"?

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Reply to
Dan
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Might you be such a low risk that the bank with whom you just re- financed was afraid that, if they did not re-fi you at 5% and x points, then you would run down the block and re-fi with someone else?

Reply to
honda.lioness

I was going to refinance also, so I would like to know, what were your costs of refinancing?

I am a low risk borrower, as I have about 55% equity and our payments are only appx. 11% of our income.

i
Reply to
Igor Chudov

That is quite possible. And if it is true, he probably could have got

4.75% if he had run down the block. When shopping for mortgage refinancing, the current lender should be the last stop, not the first.
Reply to
Don

The credit crunch doesn't impact rates. It impacts availability of credit. The rates are based on the long bond, which is very low at the moment. What has changed is that it is now much harder to qualify for a home mortgage.

-john-

Reply to
John A. Weeks III

30 yr fixed SoCal 5.125% with 0 points and about $2200 in non recurring costs 4.875% with 1 point and 1 pt + $2200 non recurring costs

Nonrecurring - appraisal, title insc, escrow, filing Recurring costs - interest, 2 mo of impounds For me this meant that non recurring costs would be paid off in 32 months. Documentation (income, assets etc) was over an inch thick

I did find lower rates but the recurring costs were running about $4500 with charges for notaries, couriers, processing etc. In terms of recovering non recurring costs we were looking at 60 months.

Reply to
Avrum Lapin

because they're afraid of defaulting borrowers.  In such conditions, the loans that are actually made would have relatively high interest rates, since when risk to the lender is high, or perceived as high, then the interest rate goes up, reflecting a 'risk premium' demanded by the lender.  But I just refinanced my home mortgage at 5% for a fixed-rate 30-year loan: a very low interest rate relative to recent history.  That looks like free-flowing money to me . . . so why is the bank willing to lend to me at such a low rate during a "credit crunch"?

Maybe you have high credit scores and are willing to put a high down payment.

Reply to
PeterL

high interest rates, since when risk to the lender is high, or perceived as high, then the interest rate goes up, reflecting a 'risk premium' demanded by the lender.  But I just refinanced my home mortgage at 5% for a fixed-rate

30-year loan: a very low interest rate relative to recent history.

Even though the effective rate of 5% is relatively low, the spread between 5% and the Fed rate of 0% is pretty high. In the previous bottoming of rates, the spread was as small as 2 or 3% points.

HTH

Reply to
Augustine

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