Arkansas Mortgage Rates

Mortgage applications up at the first of June

It appears that low interest rates are bringing prospective buyers back to the real estate market.

In April 2008, the federal government started handing out tax credits to first-time home buyers. That program expanded to include repeat buyers. By the time it ended at the end of April last year, qualified first-time buyers could receive up to $8,000 and repeat buyers could get up to $6,500.

Buyers were initially instructed to get homes under contract before May 1 and close on them prior to July 1. That resulted in a flurry of mortgage applications through the end of April and a decline in them through June as people got ready to close on there purchases.

That being the case, we’re no longer comparing against times when tax credits were in place and can start to get a sense as to where the market is heading. According to the national Mortgage Bankers Association, purchase applications were up in June when compared against the same time last year and that is encouraging.

The Mortgage Bankers Association pointed out that interest rates on 30-year fixed mortgages stood at 4.51 percent, making them the lowest on record since November. Buyers took advantage of those low rates and purchase mortgage applications during the week of June 10 were up 6.1 percent compared to the same time last year.

There are a couple of things to keep in mind when considering the report. For one thing, mortgage rates are still hovering around that 4.51 low for a 30-year, fixed interest loan. Also, 15-year mortgage rates averaged 3.67 percent during the week of June 10 and are still around that level.

In other words, it’s comparatively cheap to borrow money right now and that works to the advantage of buyers. In Arkansas, low prices have attracted buyers and should continue to do so as real estate markets continue to recover.

Looking just at central Arkansas, we see the average sales price of a home in May fell about $1,200 from the same month last year to $161,467. Other areas of the state have reported drops in prices as well.

Interestingly enough, the average sales-to-list ratio throughout Arkansas remains around 96 to 97 percent in most areas – sellers who want, say, $100,000 for their homes can typically expect around $96,000 to $97,000 on average.

Real estate markets do tend to favor buyers these days. Those sellers who price their homes well will generally get some people looking at them and buyers can take advantage of solid prices and low interest rates.

5-Year ARM Falls To Historic Lows | The Daily Mortgage Report

The interest rate differential between fixed-rate and adjustable-rate mortgages continues to widen and has now reached historic levels.

There’s never been a better time to lock an ARM.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, homeowners in Arkansas who lock their mortgage rate today will save 129 basis points on rate, on average, by choosing a 5-year ARM as their mortgage product as compared to a 30-year fixed rate loan.

The average 30-year fixed rate is 4.51%. The average 5-year ARM rate is 3.22%.

It’s the biggest interest rate spread between fixed-rate and adjustable-rate mortgage rates in Freddie Mac’s recorded history; a gap which is the result, in part, of the 5-year ARM dropping to all-time lows this week.

Rates for the 5-year ARM are even lower than during last year’s historic Refi Boom.

Putting today’s “spread” in action against a hypothetical $250,000 loan size, a homeowner that chooses an ARM over a fixed-rate loan would save $184.30 monthly, and would have $500 fewer closing costs.

That’s a 5-year savings of $11,558 — nearly triple what you would have saved just 2 years ago.

The main reason why today’s adjustable-rate mortgages are priced so aggressively relative to comparable fixed-rate loans is that Wall Street expects the economy to drag for the next several quarters, after which it expects an acceleration. 

ARMs tend to reflect short-term expectations for the U.S. economy which is why short-term mortgage rates are dropping.  Fixed products, by contrast, take a longer view and expectations for an economic rebound are pulling fixed-rate mortgage rates up.

For now, mortgage applicants can exploit the difference — especially those who plan to move within the next 5 years — but adjustable-rate mortgages aren’t right for everyone. ARMs carry particular risks about which you should be aware before locking.

Before you choose an ARM, therefore, talk it through with your loan officer.

Mortgage and real estate executives report

Black Enterprise

Kiplinger's Personal Finance

Kiplinger's Personal Finance

Congressional edition