Mortgage Rates on the Rise, But Still Near Historic Lows

October 13, 2011 (www.bankrate.com) Via Paul Soule, Coldwell Banker Home Loans.

Mortgage rates climbed this week after investors became less pessimistic about the financial crisis in Europe and the employment market in the United States. But rates remain near all-time lows and are expected to stay at those levels at the expense of the economy

If you missed the boat on locking a rate when rates reached another record low last week, there’s no need to lose sleep over this week’s increase. It is unlikely rates will continue to rise, and some economists say they expect them to stay low for months to come.

The upward trend is not expected to last. The rate on 30-year fixed mortgages isn’t expected to rise beyond 4.5 percent until late 2012, according to the MBA’s forecast. Of course, a shift in the economy or any major event that affects the global markets could change that projection in minutes.

A year ago, the MBA predicted $996 billion in home loans would be originated this year. The forecast has been changed to $1.2 trillion. Next year, the association predicts origination of about $900 billion in mortgage loans, a 25 percent decline compared to this year. At the peak, in 2003, lenders originated $4 trillion in home loans.

Potential changes to HARP, the Home Affordable Refinance Program, or any other government measure that makes it easier for underwater borrowers to refinance could increase refinance volume.

NATIONAL RATE SURVEY RESULTS
Oct 13th, 2011 (Bankrate.com)

30-year Conventional:
4.37% — with avg. points: 0.40 pts

15-year Conventional:
3.59% — with avg. points: 0.40 pts

30-year FHA:
4.09% — with avg. points: 0.40 pts

5-year Conventional ARM:
3.26% — with avg. points: 0.40 pts

Bin Laden’s Death and European Debt Crisis = Good News for Mortgage Rates
May 5, 2011

One factor that may contribute to keeping rates low for now is the fear of potential retaliation from terrorist groups after the death of Osama bin Laden. The United States kept its official threat level unchanged after the al-Qaida leader was killed in a U.S. raid in Pakistan this week, but security at many airports and subways was heightened.

While the killing of bin Laden itself did not have a direct and immediate impact on rates, the threat of potential retaliation is likely to affect rates,
Any unexpected event, especially terrorism threats, tends to have a very deep impact on rates. It’s bad for the stock markets and good for the bond markets, and that normally leads to lower rates.

That’s because during times of political uncertainty, nervous investors tend to pull money out of riskier investments, such as the stock market, and seek safer investments such as Treasury bonds. The higher demand for bonds causes yields to drop. Mortgage rates normally follow bond yields.

Another international event that may influence mortgage rates in the United States is the Greek debt crisis,
Greece story is having the biggest impact, in driving investors into the U.S. bond market.
Greece received a bailout of $160 billion last year but continues to struggle with its debt, which represents about 150 percent of its gross domestic product.
Ireland and Portugal also are in deep financial trouble.

While the U.S. economy is bad, the U.S. debt is still perceived as a much safer investment than the debt of some European countries, Findlay says.

NATIONAL RATE SURVEY RESULTS
May 5, 2011 (Bankrate.com)

30-year Conventional:
4.88% — with avg. points: 0.35 pts

15-year Conventional:
4.05% — with avg. points: 0.35 pts

30-year FHA:
4.74% — with avg. points: 0.35 pts

5-year Conventional ARM:
3.56% — with avg. points: 0.35 pts

Thank you BankRate and Paul Soule of Coldwell Banker Home Loans.

The latest mortgage information shows that interest rates were up slightly this past week.  Still very affordable rates.  They remain at near historic lows.  Here’s what’s driving our rates as shared with us by Paul Soule, Senior Mortgage Advisor with PHH Home Loans in Ocean City, Maryland.

March 24, 2011

Inflation Concerns Hurts Bond Demand

Freddie Mac’s latest survey reports a slight increase in mortgage rates this week. Concerns about inflation and political unrest drove investors away from bonds, pushing prices down and rates higher.

This week, the 30-Year fixed-rate mortgage (FRM) edged up to an average 4.81 percent , compared to last week when it was at 4.76 percent. Last year at this time, the 30-year FRM averaged 4.99 percent.

The 15-year FRM this week averaged 4.04 percent, up from last week when it averaged 3.97 percent. A year ago at this time, the 15-year FRM averaged 4.34 percent.

The 5-year Treasury-indexed hybrid ARM also moved higher,  averaging 3.62 percent this week, compared to last week when it averaged 3.57 percent. A year ago, the 5-year ARM stood at 4.14 percent.

Similarly, the 1-year Treasury-indexed ARM rose to an average 3.21 percent, up from last week when it averaged 3.17 percent. At this time last year, the 1-year ARM averaged 4.2 percent.

Frank Nothaft, chief economist for Freddie Mac, cited inflation as a leading cause for the increases, explaining, “Mortgage rates were up this week compared to last, but still remain at relatively low levels. The rate uptick was related to higher than anticipated inflation data for February and ongoing geopolitical concerns. The 12-month growth rate in the consumer price index rose 2.1 percent in February, compared to 1.6 percent in January; however, most of the increase was due to food and energy prices, which tend to be volatile. The core index rose 1.1 percent, slightly up from 1.0 percent in January. “

Nothaft also commented on the broader housing picture. He said, “The housing market recovery experienced a setback during the start of this year. Existing home sales fell 9.6 percent from January to February and were down 2.8 percent from February 2010.  Sales of new homes declined for the second consecutive month in February to record lows dating back to 1963. Even new construction on one-family homes fell 11.8 percent in February to the third slowest pace since 1959.”

Thirty-Year Back to 5 Percent

Freddie Mac’s latest survey reports longer-term rates eased a bit this week as was expected when Treasury yields fell slightly.

The 30-year fixed-rate mortgage (FRM) averaged 5.0 percent for the week, down from last week when it averaged 5.05 percent. Last year at this time, the 30-year FRM averaged 4.93 percent.

The 15-year FRM also eased this week, averaging 4.27 percent compared to last week when it averaged 4.29 percent. A year ago at this time, the 15-year FRM was at 4.33 percent.

The 5-year Treasury-indexed hybrid ARM averaged 3.87 percent this week,  down from last week when it averaged 3.92 percent. A year ago, the 5-year ARM averaged 4.12 percent.

The 1-year Treasury-indexed ARM bucked the trend, averaging 3.39 percent this week, up from last week when it averaged 3.35 percent. At this time last year, the 1-year ARM averaged 4.23 percent.

Frank Nothaft, Freddie Mac’s chief economist, commented on the current rate picture and the housing market. He said, “Fixed mortgage rates eased slightly this week and continue to be very affordable. Prior to 2009, interest rates for 30-year fixed-rate mortgages had never been at 5 percent since our survey began in April 1971. In both 1981 and 1982, the rates were over three times as high as they are today.”

Nothaft added, “The housing market is struggling to regain traction despite still historically low rates. New construction on one-family homes dipped slightly in January to an annualized pace of 413,000 units, which was the fewest number since May 2009. In addition, homebuilder confidence didn’t improve for the third consecutive month in February and remains near record lows, according the NAHB/Wells Fargo Housing Market Index”

Thx again to Paul Soule from Coldwell Banker Home Loans.

With the economy in the news every day, more attention is being focused on the Federal Reserve than ever before.

The Federal Reserve is made up of twelve Federal Reserve Banks, overseen by the Board of Governors.  The Board of Governors is located in Washington, DC and is comprised of just seven members, who are appointed by the President and confirmed by the Senate.

The main responsibilities of the Fed include:

• Researching US national and regional economies
• Providing financial services to depository institutions, the US government, and foreign official institutions
• Supervising and regulating banking institutions to ensure the safety of the nation’s financial system and protect the credit rights of consumers
• Conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable  prices, and moderate long-term interest rates
• Communicating information about the economy via publications, speeches, seminars and websites; including the statement given by the Federal Chairman, following the eight formal meetings that take place about every six weeks throughout the year.  At these meetings, the Fed has the opportunity to make changes to the Federal Funds Rate, and make their decision by reviewing economic and financial conditions.  They can also make adjustments to the Fed Funds Rate outside of these meetings.

Overall, the Fed’s main responsibility is to keep the economy growing at a steady pace by keeping inflation stable and rates moderate.  When inflation is low and stable, businesses and households can spend, knowing that their purchasing power can remain strong.

So many buyers are taking advantage of interest rates at historic lows, either by re-structuring debt with a refinance or purchasing a new home or condominium.  However, the recent economic issues have created even tougher guidelines and credit requirements and there are some things that consumers must be aware of when applying for a loan.

A leading credit expert, Linda Ferrari, developed the top 10 credit don’ts during the loan process, to help you understand the loan transaction and those things that can unknowingly wreak havoc on your credit report.

1.    Don’t do anything that will cause a red flag to be raised by the scoring system

2.    Don’t apply for new credit of any kind

3.    Don’t pay off collections or charge offs

4.    Don’t max out or over charge on your credit card accounts

5.    Don’t consolidate your debt onto 1 or 2 credit cards

6.    Don’t close credit card accounts

7.    Don’t pay late

8.    Don’t allow any accounts to run past due-even one day!

9.    Don’t dispute anything on your credit report

10.Don’t lose contact with your mortgage and real estate professionals

A prepared educated borrower is a successful borrower!

I can not stress the importance enough of working with a lender that has a proven track record of processing and approving a condominium product loan. If they don’t, many loans have not been placed, because lenders take a loan that they can not compete.

Paul Soule with Coldwell Banker Home Mortgage takes the time to discuss with me, the unique situations that arise with condominium financing, and thoughts for 2010 interest rates.

Mortgage Rates Seen Below 6% Through 2010

Even as mortgage rates remain near record lows, the Mortgage Bankers Association believes that the looming expiration of a key Federal Reserve program may increase home loan costs next year. Still, the MBA expects rates to remain extremely attractive throughout 2010, helping to juice home sales and insert a floor underneath real estate values. Here are five things you need to know about the MBA’s 2010 economic outlook:

1. Opposing forces: The MBA expects subdued inflation and high unemployment to put downward pressure on 30-year fixed mortgage rates next year. However, “there is a lot of uncertainty regarding rates immediately following the termination of the Federal Reserve’s purchase of mortgage-backed securities,” Jay Brinkmann, MBA’s chief economist and senior vice president for research and economics.  “No doubt the Fed will do its best to minimize adverse effects, but the elimination of these purchases will put upward pressure on all long-term rates as well as the spread between mortgage rates and Treasuries.”

2. Fed programs and rates: The Federal Reserve got into the business of driving down mortgage rates in November of 2008 as it scrambled to stabilize the free-falling housing market. To that end, it announced plans to buy up debt and mortgage-backed securities from Fannie Mae and Freddie Mac. In March of this year, it expanded the program to include the purchase of long-term treasury bonds and additional Fannie and Freddie assets. This asset purchase program is a key reason why rates have remained so attractive for nearly a year. Guy Cecala, publisher of Inside Mortgage Finance, says the program has brought rates roughly a full percentage point lower than they would be otherwise.

3. Getting out: But as the housing market shows signs of stabilization, the Fed is looking to unwind some of this support. Its treasury-bond purchase program, for example, is expected to conclude by the end of the month. However, in the absence of a private market for mortgage-backed securities, the Fed moved in late September to extend its program for buying up these assets. Without committing additional funds to the initiative, the Fed said it will continue buying up debt and mortgage-backed securities from Fannie and Freddie through the first quarter of 2010. (The program had been scheduled to expire at the end of the year.) By remaining in the market, the Fed can help ensure that rates remain in an attractive range for a longer period of time. And rather than risk sharply higher mortgage rates, the Fed may extend the program again, depending on how the economy and housing markets perform in the coming months.

4. Less than 6 percent: While acknowledging that the expiration of this program is likely to push rates higher, the MBA expects rates to remain in an attractive range in 2010. Fixed mortgage rates will average around 5 percent in the final quarter of this year and rise to 5.6 percent by the end of 2010, the MBA predicts.

5. Sales and prices: The MBA predicts the unemployment rate will peak at 10.2 percent in the second quarter of next year. Nevertheless, the trade group expects to see an increase in home buying activity next year, with exiting-home sales up 11 percent from 2009 levels and new-home sales increasing 21 percent. In addition, “[national] average home price declines should abate by early 2010, but will vary by state and home value,” the MBA said in its press release. “The demand will be highest for entry-level homes.”

Mortgage Rates This Week – Relatively Unchanged

NATIONAL RATE SURVEY RESULTS (10/29/2009 Results)

30-year Conv:          5.35% -- w/ avg. points: 0.37 pts

15-year Conv:          4.74% -- w/ avg. points: 0.37 pts

30-year FHA:           5.27% -- w/ avg. points: 0.17 pts

5-year ARM:            4.64% -- w/ avg. points: 0.37 pts

PHH DAILY RATE CHANGES – LAST 10 BUSINESS DAYS

Date                      Conventional                           FHA                                      VA                                        

10/29                     Relatively Unchanged             Relatively Unchanged            Relatively Unchanged                      

10 Year Treasury Yield opens at 3.42

10/28                     Slightly Lower                        Relatively Unchanged            Relatively Unchanged                       

10 Year Treasury Yield closed at 3.41

10/28 (2)                Lower                                    Slightly Lower                       Slightly Lower                                     

Rate Change for the Better!

10/27                     Relatively Unchanged             Relatively Unchanged            Relatively Unchanged                       

10 Year Treasury Yield closed at 3.46

10/27 (2)                Lower                                     Lower                                   Lower               

Rate Change for the Better!

10/26                     Relatively Unchanged             Relatively Unchanged            Relatively Unchanged                       

10 Year Treasury Yield closed at 3.55

10/26 (2)                Slightly Higher                       Slightly Higher                       Slightly Higher  

Rate Change for the Worse.

10/23                     Slightly Higher                       Relatively Unchanged            Relatively Unchanged                       

10 Year Treasury Yield closed at 3.47

10/22                     Relatively Unchanged             Slightly Higher                      Relatively Unchanged                       

10 Year Treasury Yield closed at 3.42

10/21                     Higher                                     Slightly Higher                      Slightly Higher                                       

10 Year Treasury Yield closes at 3.41

10/20                     Lower                                      Lower                                   Lower               

10 Year Treasury Yield closes at 3.34

10/19                     Relatively Unchanged             Slightly Higher                      Slightly Higher

10 Year Treasury Yield closes at 3.40

10/16                     Slightly Higher                         Slightly Higher                     Slightly Higher                                 

10 Year Treasury Yield closes at 3.42

RATE FORECAST

Will rates rise or remain relatively unchanged?

Industry experts and analysts provide their insights.

8% of respondents expect rates to fall in the coming weeks

67% predict a further increase in mortgage rates while the remaining

25% forecast that mortgage rates will remain more or less unchanged

As always many thanks to Paul Soule from Coldwell Banker Home Loans for providing these statistics.

Here are the National Rate survey Results (10/01/2009)

30 year Conventional Loan: 5.25% w/ average points 0.31

15 year Conventional Loan: 4.64% w/ average points 0.31

30 year FHA Loan: 5.24% w/ average points 0.09

5 year Adjustable Rate Mortgage: 4.69% w/ average points 0.31

Will rates rise or remain relatively unchanged?
Industry experts give their insights;

• 29% of respondents expect rates to fall in the coming weeks
• 21& predict a further increase in mortgage rates
• 50% forecast that mortgage rates will remain more or less unchanged

In my market in Ocean City, where a significant number of the properties that I sell are second home or investment condominiums, we have a pretty fair amount of different loan products available to assist the buyer.

Right now some local lenders have great rates on a 5/1 ARM at 4%.

Let’s compare:

• $300,000 loan amount @ 4.375% is a monthly interest only payment of $1,094
• $300,000 loan amount @ 4% is a principal and interest payment of $1,432
• $300,000 loan amount @ 5.25% on a year year fixed monthly payment is $1,657

just a quick update to keep you posted.

Interest rates…everybody wants to know where they are headed. Here’s what’s coming out this week that will definitely have an impact.

The Fed’s Beige Book – officially known as the Survey on Current Economic Conditions will be reported on Wednesday. It shows info from banks, interviews with business contacts, economists, market experts, and other sources. The Beige Book is thought by some to be looking in the rearview mirror too much, but it can serve as a future indicator of the Fed’s policy decisions.

This Thursday, the Initial Jobless Claims report will be released. Last week, the number filing for jobless benefits fell, even though it was still higher then previous estimates. Markets will be watching to see if this report hits expectations of approximately 556,000 new claims.

Also on Thursday, the Balance of Trade for July will be reported. The expectations are that the trade deficit will come in the same as the previous month when it widened to $27 Billion. A negative balance of trade (deficit) occurs when imports surpass exports. The United States trade balance has been in a deficit since the mid 1970’s.

Lastly, on Friday, the Preliminary Consumer Sentiment Index will come out. This is a survey conducted by the University of Michigan and measures consumer attitudes regarding the present and future economic conditions.

The biggest factor this week is treasury auctions as the release and sale of Government Bonds can affect Mortgage Bonds, which can alter our interest rates. It’s good to keep your eye on Treasuries and stocks this week as an excellent indicator of what rates will do.

As always, many thanks to Paul Soule, a Senior Mortgage Advisor with Coldwell Banker Home Loans.