Why of Rising Interest Rates and When Renting can trump Buying

Why Are Mortgage Interest Rates Increasing?

According to Freddie Mac’s latest Primary Mortgage Market Survey, the 30-year fixed rate mortgage interest rate jumped up to 3.94% last week. Interest rates had been hovering around 3.5% since June, and many are wondering why there has been such a significant increase so quickly.

Why did rates go up?

Whenever there is a presidential election, there is uncertainty in the markets as to who will win. One way that this is noticeable is through the actions of investors. As we get closer to the first Tuesday of November, many investors pull their funds from the more volatile and less predictive stock market and instead, choose to invest in Treasury Bonds.
When this happens, the interest rate on Treasury Bonds does not have to be as high to entice investors to buy them, so interest rates go down.  Once the elections are over and a President has been elected, investors return to the stock market and other investments, leaving the Treasury to raise rates to make bonds more attractive again.
Simply put, the better the economy, the higher interest rates will go. For a more detailed explanation of the many factors that contribute to whether interest rates go up or down, you can follow this link to Investopedia.

The Good News

Even though rates are closer to 4% than they have been in nearly 6 months, they are still slightly below where we started 2016, at 3.97%.
The great news is that even at 4%, rates are still significantly lower than they have been over the last 4 decades, as you can see in the chart below.

Any increase in interest rate will impact your monthly housing costs when you secure a mortgage to buy your home. A recent Wall Street Journal article points out that, “While still only roughly half the average over the past 45 years, according to Freddie Mac, the quick rise has lenders worried that home loans could become more expensive far sooner than anticipated.”
Tom Simons, a Senior Economist at Jefferies LLC, touched on another possible outcome for higher rates:

“First-time buyers look at the monthly total, at what they can afford, so if the mortgage is eaten up by a higher interest expense then there’s less left over for price, for the principal. Buyers will be shopping in a lower price bracket; thus demand could shift a bit.”

Bottom Line

Interest rates are impacted by many factors, and even though they have increased recently, rates would have to reach 9.1% for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.

This is a good time to buy a home.  Want help connecting with an Accredited Buyer's Representative near you?  Give me a call (Lori Koschnick 920-901-4373).  It's a pleasure to help!  

Where are Mortgage Interest Rates Heading?

Where are interest rates heading?

    http://goo.gl/zVmMTP

Lenders, Start Your Engines: NASCAR Mortgage Sponsorships Return

Things can't be too bad in the mortgage industry when companies are getting back into NASCAR sponsorships, right?

LendingTree announced Thursday it would sponsor the rookie driver Parker Kligerman in Sunday's Daytona 500. LendingTree joins Quicken Loans among the first mortgage brands to re-emerge as NASCAR sponsors after the housing crisis.

Given the number of now-defunct former racing sponsors from the mortgage industry – FirstPlus, Argent and Ameriquest come to mind – it may be surprising to see companies re-enter the sport. But the reasons that drove those subprime lenders' sponsorship strategies are still relevant in today's industry.

"NASCAR's fans are fiercely loyal. They understand that sponsorships make their sport possible and they embrace those companies in the sport," says Aaron Emerson, a spokesman for Quicken Loans.

LendingTree's last-minute, one-race deal came a day after Kligerman was involved in a wreck during practice that sent his car airborne, ripped a hole in the track's perimeter fence before landing on its roof — forcing his small upstart team, Swan Racing, to resort to a backup car for Sunday's race, which kicks off the 2014 Sprint Cup Series season. The LendingTree "spokespuppet," Lenny, donned the hood of the backup car, No. 30, which started in 41^st place.

"This is a short-term deal and we are looking to see what sort of performance and reaction we get to it," says Fred Saunders, LendingTree's senior vice president of marketing. "Part-in-parcel with that is also determining how we can leverage this sort of promotion as a bona fide business driver and to build awareness and business at the same time."

No longer a lender after selling its mortgage origination business to Discover Financial Services in June 2012, LendingTree has refocused on its core business of lead aggregation. The company is headquartered in Charlotte, N.C., where the teams that compete in NASCAR also operate. The Daytona 500 sponsorship is LendingTree's first professional sports marketing effort.

"'When banks compete, you win' has been our tagline forever, and we've come back into the marketplace with a refreshed platform to help support our mortgage, auto and home services verticals," Saunders says. "We wanted a platform that was broad enough to support the new expanding profile of LendingTree."

Mortgage brands were a common sight on the hoods of racecars during the housing boom. FirstPlus Financial appears to be the first, sponsoring Jeff Ward and Eddie Cheever in the 1997 Indianapolis 500. A year later, FirstPlus moved from the open-wheel Indy Racing League to stock cars, sponsoring a NASCAR team co-owned by the NFL's Dan Marino and driver Bill Elliott.

But the sponsorship — which featured the FirstPlus name on the turquoise and orange No. 13 car resembling Marino's Miami Dolphins uniform — was short-lived. The race team struggled on the track, with rookie driver Jerry Nadeau getting replaced midseason after failing to qualify for 4 of 18 races. Meanwhile, FirstPlus had its own struggles off the track. The lender, which specialized in high loan-to-value home equity and subprime lending, suffered staggering losses, and later filed for bankruptcy protection and was sued by the race team in 1999.

GMAC's subprime consumer-direct brand may best be remembered for its "Lost another loan to Ditech!" ads. But Ditech also sponsored Hendrick Motorsports drivers from 2003 to 2005. GMAC's relationship with the Hendrick organization (whose current drivers include Dale Earnhardt Jr. and six-time and reigning Sprint Cup champion Jimmie Johnson) dates back to 1993, and its brand replaced Ditech's from 2006 to 2007.

This was of course, during the throes of the financial crisis. GMAC was spun off from General Motors in 2006 and later received a $17.2 billion bailout from the Troubled Asset Relief Fund in 2008. The Treasury Department announced plans last month to reduce its ownership stake in the finance company, now known as Ally Financial, to 37%.

The Ditech brand lives on, after being acquired by Walter Investment's Green Tree Originations business. Selling the name was part of Ally's efforts to reorganize its mortgage business into an entity called Residential Capital, which was put into bankruptcy.

For a time, it seemed like a mortgage tradeshow exhibit hall just wasn't complete without at least one racecar on display. Before Danica Patrick was GoDaddy's spokeswoman, she was Argent's, and a regular fixture representing the subprime wholesale lender at events like the annual National Association of Mortgage Brokers convention.

Subprime lending's obsession with motorsports marketing seemed to know no limits, driven largely by Argent and sister brand Ameriquest, the retail lending division of parent company ACC Capital Holdings. While Argent was sponsoring Patrick in open-wheel racing development leagues, its logo was also emblazoned on the winning car of the 2004 Indianapolis 500, driven by her teammate Buddy Rice. Argent continued its relationship with Patrick when she moved up to the Indy Racing League, where her fourth-place finish in the 2005 Indianapolis 500 landed her (and Argent's logo) on the cover of Sports Illustrated and remains the best-ever finish by a female driver.

Argent made Patrick the face of its campaign to move up into Alt-A originations, with ads featuring the driver frequently appeared in National Mortgage News, its sister publications and other media.

Meanwhile, Ameriquest was staying busy in NASCAR. It arranged a unique promotional package with Roush Racing to sponsor four drivers in what was then called the Busch (now Nationwide) Series, the NASCAR equivalent of baseball's triple-A minor league.

While a typical sponsor will have its logo on a single car, the four Roush drivers split up the driving duties on two Ameriquest-sponsored cars throughout the 2006 season. In two events that year, all four drivers took to the track. Dubbed the "Ameriquest Dream Team," the drivers combined to win five races in 2006, including a race in California where Carl Edwards started from the pole and finished third, and teammate Greg Biffle started third and won the race — with the Ameriquest logo on both cars' hoods.

 Full Story