Austin Mortgage Rates. Week of 12.28.09.

Austin Mortgage Rates. Week of 12.28.09.

Much like the rest of 2009, Austin mortgage rates were very volatile last week. Rates ended the week around where they began the week, which Freddie Mac estimates is around 5.14% nationally for conventional 30 year fixed rates. However, according to Freddie Mac mortgage rates have increased approximately .5% since the beginning of December -- wowza!

So why are mortgage rates increasing?

Austin mortgage rates are determined by the price of mortgage-backed securities (MBS) on the secondary market (MBS prices and mortgage rates are inversely related). It takes about four months for new loans to sell as MBS, and there are a lot of them currently being sold because of the high amount of loans originated in the late summer/early fall of 2009. Unfortunately, there aren't as many buyers of MBS because the Fed has decreased its purchases. Therefore, there's a high supply of MBS which is keeping their prices low (you know, basic supply and demand effect on prices). As I've mentioned above, as MBS prices are kept low, Austin mortgage rates increase. Whew! Confused yet? :)

What do increasing mortgage rates mean for you?

If you're a buyer, then your purchasing power decreases. A $200,000 home with 20% down costs you $50 more a month now than it did at the beginning of December.

If you're a seller, increasing rates reduces the amount of buyers able to buy your home.

People, I know you've heard this before, but NOW truly is the time to buy/sell. Why? Austin mortgage rates will continue to rise as the Fed winds down its purchase of MBS by March 2010. I heard on CNBC last week that Morgan Stanley expects Austin mortgage rates to be .75% than current rates by the end of 2010. No bueno.

Forecast for the Week

We have some economic news due out this week that has the potential to change Austin mortgage rates. First off, Tuesday brings December's Pending Home Sales report. Next, we'll hear some employment news on Thursday with the Initial Jobless Claims report and Friday's Jobs Report. December's employment figures were better than expected, which wasn't good for mortgage rates. Remember, generally speaking, better than expected economic news is bad for Austin mortgage rates, and visa versa.

Interested in semi-frequent updates on Austin mortgage rates, real estate news and commentary? Contact me or Follow me on Twitter!

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Nicole Lahti is a Loan Officer in Austin, Texas. Contact Nicole at nicole@nicolelahti.com, or 512-507-8312.

Austin Mortgage Rates. Week of 12-28-09.