Flashback from Markets past.
by Evan Vanderwey on 02/09/10 at 8:14 am
In 2003 rates hit all-time lows for that era. 30-year fixed rates touched down at around 5.5% at their lowest and 15-year fixes leveled out at almost at 5% even.
Today, rates are better than that by one full percentage point.
The reason I’m reminded of this is because I’m finally seeing a lot of my customers again, folks for whom I wrote loans in 2003 – it took today’s low rates to make the savings worth the cost of refinancing. Going from a 30-year in 2003 to a 15-year today, as many are, is as much as a 1.5% savings. This obviously depends on the appraised value.
I’m not just taking a stroll down memory lane here for the fun of it – today I’m remembering something that I think is an important recollection.
I was recalling how fast the rates went from 5.5% in June of 2003 to almost 7% by mid August – just 40 days or so later. In fact, the rates went from 5.5% to 6% in two days and then slowly climbed from there over the next 5 or 6 weeks.
There are a couple of things I remember about this time specifically.
First, I remember that I was on vacation. That was no fun. My cell phone was getting messages over those two days every five minutes or so telling me about major market movements for the worse. I was on the phone with my office protecting locks for clients and calling clients to make decisions. Many did, many did not. That was a very busy and stressful 48 hours. (My wife remembers it too.)
Secondly, I remember that I did not see it coming that soon. Sure, we all knew that the low rates would not last forever. They had to go up sometime. But after a fourth month in a row of rates falling ‘just a little more’ the tendency was to get used to them. When the rise actually happened, it caught many of us off guard.
So, what’s my point?
Like my last post I’m trying to help folks see that trying to time the market, or hold out for just a little more savings, or ‘waiting to see’ if the rates will go just a little lower is a dangerous game. When you think about what’s involved with that process, it becomes clear that it’s actually more like gambling than anything else.
The moral of my flashback is this: If you have a good deal in your hand (and an appraisal that says you can do it) then lock your rate today and take the gains. Tomorrow is uncertain.
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