Home Equity Loan Rates Increase (heloc, 30 year fixed, banks, lend)

[Humboldt1]

Why are rates up so much the past few days? Per Bankrate and YahooFinance, rates appear to be up nearly 30bps over last week. What happened to cause rates to move up so much? This not a good sign when HELOCs and Home Equity Loans are up so much when I was just quoted 4.875% for 30 year fixed mortgage.

My guess is the market is pricing in additional declines in home values and thus less equity to lend against.

[chet everett]

The HELOCs used to all march to the indexes like LIBOR and COFI for pretty much anyone with equity to borrow against. Now each lender might still have that as base but margin is all over the place depending on size of loan, FICO and percent of equity extraced. There are places giving big discounts (like 2% under COFI) for high FICO / high loan amount / low precentage of equity.

The summaries at Bankrate and Yahoo may be reflecting a different mix of borrowers OR a true move in HELOC terms, hard to tell. I think the lenders like making things more opaque...

[Humboldt1]

Agreed, but 30 bps in a couple of days is a major movement.

I actually refer to the HELOC and Home Equity Loan rates in my analysis of how prices are doing. I believe that as lenders become more confident of home prices stabilizing and then rising you will see home equity loan rates start to drop (HELOCs are prime based and more dependent on movements in prime). This huge increase in price to me signals that we are not out of the woods yet, certainly not from the banks standpoint.

Until banks themselves are confident about rising home equity values I would be very careful buying a home in a potentially declining market.

[chet everett]

[quote=Humboldt1;9746124... I would be very careful buying a home in a potentially declining market.[/quote]


The risk is certainly still present, but my gut says that every day that passes without some DOOM scenario making the LEAD STORY on CNN things are one step closer to firm ground...