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With interest rates trending upward, Now is the Time to Act


Mortgage interest rates are making waves again in Hawaii’s housing market – and this is one set you may want to catch because rates are on the rise.

After several months when mortgage rates dropped below 4 percent – down to an all-time low of 3.5 percent at First Hawaiian Bank just a few weeks ago – rates may be creeping upward again. At First Hawaiian Bank, the 30-year fixed rate mortgage with 2 points is at 3.875 this week.

“The low rates were caused by several factors – the economic troubles in the U.S. most of all, and to some extent the economic problems overseas, especially in

Europe,” says Jeff Bamer, vice president of the bank’s investor management department. “The federal government has used several tactics to boost the economy, many of these include directly or indirectly lowering interest rates. That is why many refer to the current interest rates as ‘artificially low.'”

But recent signs point to a rebounding economy.

“There is a long list of economic gauges that are closely watched, including the unemployment rate, home sales, consumer spending and many others,” says Bamer. “These indicators have been trending upward recently.”

Many economists say these are indications that the financial health of the country is strengthening, while others are not convinced.

“One thing is for sure, though: There is more optimism about the economy than there has been for a long time,” Bamer says.

In 2000, the average 30-year fixed rate was 8.03 percent, twice today’s average

rate. Then, after the third-quarter stock market crash in 2008, mortgage interest rates dropped to below 7 percent. The Federal Housing & Economic Recovery Act, aimed at keeping mortgage interest rates down by purchasing mortgage-backed securities, then brought rates even lower.

Bamer says we’ve likely seen the very bottom.

“As the economy improves, interest rates will rise,” he says. “We’ve already seen it start to happen. And as it gains steam, the government will stop using its influence to keeps rates low. They may even have to increase rates if inflation starts to rise.”

First Hawaiian Bank is quoting its 2.00-point rate at 3.875. Points are a way to prepay interest, to buy your interest rate down. One point equals one percent of the mortgage loan amount.

For homebuyers and those looking to refinance, the sub-4 percent rates are still available, but may not be for long. Borrowers, who understand the impact interest rates have on their monthly payment, will realize the lower payments amount to saving tens of thousands of dollars over the course of the loan.

First mortgages – even equity lines – offer tremendous savings, and there are some very tempting loan products you may not be aware existed. Products such as First Hawaiian Bank’s Home Equity FirstLine Plus, with a 1.99 percent fixed rate for 24 months, allows borrowers the flexibility of low rates for a longer term. Another product allows homeowners to borrow their home equity as a first lien; home equity doesn’t always have to be in second position.

“Some people are hesitant to refinance, for example, because they don’t want to extend the term of their loan,” says Bamer. “They may have originally taken a 30-year mortgage five years ago and now don’t want to go from having 25 years remaining back to 30. But many don’t realize that First Hawaiian Bank can cater the term to the borrowers’ wishes. So in the example above, we could do a 25-year term, thus not extending the term but still saving the borrower hundreds of dollars a month with the lower rate.

“Another strategy I love is using these lower rates to shorten your term,” Bamer adds. “Say you have a monthly payment of $1,800 and refinancing reduces that payment to $1,400. Instead of spending the $400 savings on something else, since it is already in your family’s housing budget, you can continue to make that $1,800 payment and you would pay off the loan about five years earlier.”

The personal bankers at First Hawaiian Bank can help you with your needs and see what products are right for you.

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