Mortgage Rates: Purchase vs. Refi

[space-time]

please take a look at this graph. It shows a 20 year fixed rate for purchase and for refinance. in the past 7 months the refinance rate is slightly higher than the purchase rate (the previous 5 month the rates were almost identical)

What is the reason for different rates if you buy a house or if you refinance?

http://www.bankrate.com/funnel/graph/Default.aspx?cat=2&ids=293,31&state=zz&d=365&t=MSLine&eco=-1

[$tevie]

I have no idea how things are working at this point, but my guess is going to be that the refis are rolling the closing costs into the payment, resulting in a higher rate, while the purchases do not?

[davester]

As I recall, there was a big revamp of mortgage rules around that time to stop lenders from creating junk securities out of insecure mortgages. I'd guess that has something to do with that jump.

[Felix]

space-time wrote:
What is the reason for different rates if you buy a house or if you refinance?

More people are doing refi than purchasing. Higher demand for the refi product.

They charge you more because they can.

[tenders]

When you refinance, oftentimes you can refinance with your existing lender through a process called reassignment, which sidesteps an expensive mortgage tax.

The existing lenders know this, of course, so the interest rates they offer on a refi can be a little higher and still save the homeowner money.

This does not explain the divergence of the rates you're looking at. I have no idea what would cause that discontinuity, or why they traded so similarly beforehand.

[Michael]

This guy has an answer: http://www.mtgprofessor.com/a%20-%20refi...t_more.htm

[DCrunch]

tenders wrote:
When you refinance, oftentimes you can refinance with your existing lender through a process called reassignment, which sidesteps an expensive mortgage tax.

The existing lenders know this, of course, so the interest rates they offer on a refi can be a little higher and still save the homeowner money.

This does not explain the divergence of the rates you're looking at. I have no idea what would cause that discontinuity, or why they traded so similarly beforehand.

What is this "expensive mortgage tax" that you mention? Are you referring to points? I'm in the middle of refinancing and in my "Good Faith Estimate" there is no such entry. I am refinancing with my same mortgage company - a credit union.

[tenders]

Mortgage tax is a tax you pay on the amount of a mortgage you take out!

Maybe it's half a percent of the loan or so.

It isn't a federal tax but I'm not sure if it's a state or municipal tax. But we definitely pay it here in the NYC suburbs.