No matter how low rates are, people always want more.  Whether rates are at 6% and you want 5.75% or in today’s market where they are at historic lows, and some still hold out for it to go even lower.  Because I hear so much about the phantom 4.5% rate that is coming from the government, I thought I would put together some numbers that actually show the cost of waiting for that program to show up (assuming that it will at all).

If you have a mortgage of $250,000 and a rate of 6.5%, your monthly payment would be $1580.  With a rate like that you are no doubt looking to refinance into a much lower rate that is available today.  At 5%, your new payment would be $1342 (a monthly savings of $238).  For most people, that is a very noticeable savings.

So what about 4.5%?  Your new payment would be $1266 which is a savings of $314 over your current loan, and $76 better than the option today.  But how long do you have to wait to see that rate?

The latest trend data in the bond market leads me to believe that we are in fact trending upward on mortgage rates.  This is based on a number of factors, but most noteably, the new reports available about the FED’s program to buy back mortgage backed securities.  It turns out that the FED is actually buying back the higher coupon rate mortgage bonds, not the ones that today’s rates are based on.  This means that the bonds being purchased by the FED are actually the ones backed by current mortgages in the 6% to 6.5% range (the very ones that consumers are rushing to refinance).

This will not drive down rates further, but instead will help serve as a ceiling to keep them from moving back into the 6% range for a while.  Based on this information, waiting around for rates to go lower may actually push you out of the market all together.

For more on this, check out the history of mortgage rates over the last 6 months.