Mortgage rates enjoyed another strong day, falling to the best levels in exactly 2 weeks. Rates were actually set to move higher early this morning, but a much weaker-than-expected reading on Q2 GDP helped drive demand for bonds. Better buying pushes bond prices higher and rates lower. The strength in bond markets gave lenders the peace of mind needed in order to offer even better terms than yesterday. The most prevalent conventional 30yr fixed rate is quickly returning to 3.375% on top tier scenarios.
Next week brings important economic data, including the big jobs report on Friday. The overall tone of that data should help determine whether rates will continue building on the past 2 days of positive momentum. The conservative approach would be to lock in the gains with rates at 2-week lows. The aggressive approach would be to wait until we have clear evidence AGAINST the possibility that a new trend toward lower rates has begun. As of today, there is no such evidence, but it could come at any time.
WASHINGTON — Long-term U.S. mortgage rates fell this week to the lowest level since May 2013, driven down by financial tumult in Europe.
Mortgage giant Freddie Mac says the average 30-year fixed rate mortgage fell to 3.41 percent from 3.48 percent a week ago. A year ago, the 30-year rate stood at 4.04 percent. The 15-year mortgage rate dropped to 2.74 percent, down from 2.78 percent last week and 3.20 percent a year ago.
After Britain's recent vote to leave the European Union, worried investors fled to the safety of U.S. Treasury bonds. Long-term mortgage rates tend to track the yield on 10-year Treasury notes, which fell to 1.37 percent Wednesday from 1.75 percent before the Brexit vote.
The 30-year fixed rate is now close to its all-time low of 3.31 percent in November 2012.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for a 30-year mortgage remained at 0.5 point this week. The fee for a 15-year loan was unchanged at 0.4 point.
Rates on adjustable five-year mortgages averaged 2.68 percent this week, down from 2.70 percent last week. The fee remained at 0.5 percent.
Mortgage rates fell moderately today, adding a 6th day to a winning streak that began with last week's Brexit news and bringing rates right to the brink of all-time lows. Mortgage rate movement can be measured in large and small chunks. The large chunks would be the changes in the actual interest rates being quoted and the small chunks would be the changes in the points associated with any given rate. "Points" have a historically negative connotation to some, but they're very objective, simply referring to the upfront costs or credit on a rate quote.
For instance, if you were quoted a rate of 3.5% with no origination fee, you might also have the option to get a rate of 3.375% with an origination fee of 0.7% of the loan amount. Moving the other direction, a rate of 3.625% could result in the lender being able to pay 0.7% of your closing costs. For what it's worth, the cost to move up and down in rate isn't always 0.7%, and it can also vary based on which 2 rates you're comparing. In other words, it may not cost much in terms of upfront cost to move down from 3.75% to 3.625% at a certain lender, but it could cost quite a bit more to move to 3.5%.
All of that background sets the stage for an understanding of how rates usually move each day. More often than not, markets don't move enough for the RATE itself to change. Rather, it's the "points" piece of the equation that changes. The past week has been an exception. And the actual "rate" piece of the equation has moved down 0.25% in some cases, bringing some lenders from 3.625% to 3.375%, which is now the most prevalently-quoted conventional 30yr fixed rate on top tier scenarios.
Why is 3.375% important? Simply put, the next time rates move a notch lower, they'll be back to official all-time lows. In fact, 3.375% is the lowest rate that markets were able to maintain for more than a day or two back in 2012.
Mortgage rates moved lower today, largely because they needed to get caught up with yesterday afternoon's movement in bond markets. As a reminder, mortgage rates are most directly affected by mortgage-backed-securities (MBS), which tend to move in the same direction as US Treasuries. Both MBS and Treasuries improved significantly after yesterday's Fed announcement, but lenders have been cautious in adjusting rate sheets to match market movements for a variety of reasons. When they saw markets were still in good shape when it came time to send out this morning's rate sheets, lenders had a bit more love to share.
As such, we find ourselves well into the lowest rates in more than three years, even if the pace of improvement is lagging the drop in US Treasury rates. For what it's worth, 2016's mortgage rate improvements have kept up with Treasuries much better than in 2012--the last time markets were moving abruptly for somewhat similar reasons. The average lender is now down to 3.5% in terms of conventional 30yr fixed quotes for top tier scenarios. Further improvements from here will be hard fought, so it makes good sense to consider locking to avoid a temporary pull-back ahead of next week's vote on the British referendum on remaining in the European Union.
Mortgage rates didn't move any lower today, but they earned an important distinction nonetheless. As of today, you'd have to go back 3 full years to see rate sheets any lower, on average. May 10th, 2013 was a very bumpy day for rates, and it capped a week that served as the starting point for the 'taper tantrum' (several months of rapidly increasing rates as markets adjusted to the idea that the Fed would be ending its bond buying program). With a range of 3.5 to 3.625%, today's top tier conventional 30yr fixed quotes are right in line with those seen on May 9th.
There was no meaningful inspiration for bond markets today, but it is somewhat reassuring that they've continued to hold ground even as stocks have moved much higher in recent days. While it's never a 1:1 relationship, higher stock prices often accompany a move toward higher rates as investors sell bonds (bond prices and rates have an inverse relationship).
Given that rates are at 3-year lows and that we've had a tough time breaking any lower from here, there's certainly no reason to second guess locking. Conversely, given that we've managed to stay low in spite of some headwinds, risk-takers are justified in floating, but should always set a limit as to how much higher rates could go before they lock at a loss.
Loan Originator Perspective
"I am optimistic that rates could test new lows in the near future, but I still went ahead and lock loans that are closing in May. I think short term, you should take the recent gains, lock in and move on. Longer term closings, those in June or after, I think floating is the way to go. " -Victor Burek, Churchill Mortgage
"Rates hovered near unchanged today, despite large corporate bond offerings and a treasury auction. While "not losing" is a positive, both treasury and MBS prices are well above their 25, 50, and 100 moving day averages. This typically results in a selloff at some point, the only question is when. My May pipeline, and most of June's is locked, borrowers sleeping well at night. Floating may return some additional gains, but borrowers need to realize rates move both ways!" -Ted Rood, Senior Originator
Today's Best-Execution Rates
Ongoing Lock/Float Considerations
By Mark Hamrick · Bankrate.com
The February jobs report will show how deeply bottoming oil prices has affected the U.S. labor market. Image courtesy Dan Bannister/Getty Images
The February jobs report due from the Labor Department tomorrow will give us a fresh indication as to whether the U.S. economy is being slowed down by a combination of rock-bottom energy prices and market turbulence overseas.
The oil industry, previously an engine of growth for the U.S., is now a negative thanks to oil prices that have dipped below $35 in recent weeks. Manufacturing is struggling because of economic weakness abroad. But so far, despite these challenges, the U.S. economy has continued to grow.
“It seems the labor market is not charging forward but rather cautiously advancing,” says Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness.
While fears of a recession are on the rise, most experts believe the nation will avoid an outright prolonged contraction this year.
The U.S. has added an average of 221,000 jobs a month over the past year. We will probably need some luck to hit that number for February in the upcoming jobs report. But the job market has been adding enough jobs, all these many years into the recovery, to produce further improvement.
“The economy added a well-below-trend 151,000 jobs in January, but this is more than sufficient to keep pace with growth in the working-age population, which requires adding around 100,000 jobs per month,” says economist Ryan Sweet, a director at Moody’s Analytics.
While many economists regard the unemployment rate, at 4.9%, as historically low, most people would probably agree that the job market has plenty of room to improve.
One gauge of the nation's manufacturing sector, the Manufacturing ISM Report on Business, shows that manufacturing contracted (more serious than a slowdown) in February for the 5th consecutive month.
The forces behind that contraction are complex. One issue is currency; while we might tend to celebrate a strong dollar in that it reflects the relative strength of the U.S. economy, it has the negative effect of making U.S. produced goods and services more expensive when sold abroad.
Faltering economies in Japan, Europe and China have weakened foreign currencies, which has, in turn, driven up the relative value of the dollar, and that trend is unlikely to reverse in the near future.
In last month's report, the Labor Department told us that average hourly earnings have risen 2.5% over the past year. That's an improvement, but not enough to give Americans a broad sense that they're faring better.
Indeed, frustration over slow wage stagnation may be a contributing factor in the success of "outsider" candidates in this election cycle, particularly Donald Trump, who scored several big victories in this week's "Super Tuesday" primary contests.
In a February Pew poll, more than half of those who are Republican or lean Republican agreed that the U.S. economic system unfairly favors powerful interests, and 73% of Democrats and those who lean Democratic agreed.
This will be the last employment report before the March Federal Reserve meeting, where central bankers must make a decision on whether or not to raise short-term interest rates once again.
In our latest Bankrate Economic Indicator survey, most of the economists we surveyed say the Fed will likely keep rates steady at the March Federal Open Market Committee meeting. They cited a number of factors, including the volatility in global financial markets, weakness abroad and the fear that a further rate hike would boost the value of the already-strong dollar as reasons the Fed may hold back. If the jobs market does slow substantially this year, another Fed rate boost could be pushed further into the future.
February 8, 2016 by Michael Kraus
Foreign stocks got hammered in the overnight session last night, and that momentum has carried into U.S. equity markets this morning, leading to a sharp sell-off. Once again Treasuries are benefiting as a safe haven investment, and are rallying this morning. The yield on 10-year Treasuries is around 1.77% as of writing, which looks to be the lowest yield we’ve seen in more than a year. Mortgage backed securities, which typically move with Treasuries, are also rallying this morning, and mortgage rates continue to fall. Last week Freddie Mac’s Primary Mortgage Market Survey showed the average rate on a 30-year fixed-rate mortgage with 0.6 points was 3.72%, the lowest reading since April of 2015. Rates have declined since the beginning of the year, when the Freddie Mac showed the average 30-year rate to be 3.97%.
As always, you need to be aware that the Freddie Mac surveys are collected early in the week (the results are issued on Thursday), and don’t reflect events that occurred at the end of the week. Unless there is a big bounce back in stocks this week (and the accompanying sell-off in bonds), we should see even lower rates this week.
Last week, in many ways, was just more of the same. Further questions were raised about the health of the global economy. Stocks rallied midweek, only to sell off again at the end of the week, ending up more or less where they started. Oil prices followed pretty much the same arc. 10-year yields were consistently around 1.90%, give or take a couple of basis points.
Last week’s domestic economic data also continued trends seen in prior weeks/months. Manufacturing reports showed weakness, and that weakness might be making its way into the service sector, as ISM’s non-manufacturing Survey showed weakness. Most measures of inflation remained subdued.
The most anticipated bit of news last week was January’s employment numbers, which were mixed. The headline number came in under expectations, but within the range of expected outcomes. 151,000 jobs were added in January, compared with the expectation of 188,000 jobs gained. December’s headline number was revised down from +292,000 jobs to +262,000 jobs. However, the underlying data showed more strength than the headlines. The unemployment rate fell from 5.0% to 4.9%. The workforce participation rate ticked up from 62.6% to 62.7%. Average hourly earnings were up 0.5% from last month, and are up 2.5% on a year-over-year basis.
So what to make of all this? Good question, and a good segue into the next section.
So the question is, how will all of what’s going on impact the Fed, and will it cause them to slow the pace of rate hikes moving forward, or not? Last week we heard from several Fed members (Lael Brainerd – dove, William Dudley – dove, and Loretta Mester – hawk), and they all noted the risks that global headwinds pose to the domestic economy, and I think we could characterize all their comments as being somewhat more dovish than anticipated. Some Fed members had indicated at the end of 2015 that it would likely be appropriate to hike 3-4 times over the course of 2016. We’ll see if recent developments will force them to back away from that plan. We hear from Janet Yellen twice this week, so perhaps she will shed some light on what the Fed is thinking.
For what it’s worth, the Fed Funds futures show just a 4% implied probability of a hike at the next Fed meeting in March. Looking as far forward as December, the futures only show a 25% chance of a hike. The markets are clearly not buying the idea of 3-4 hikes this year.
As evidenced by yesterday’s game, the markets are not always correct. Tim Duy, from last Friday “Solid Jobs Report Keeps Fed in Play”:
“Bottom Line: This jobs report complicates the Fed’s decision making process. They are stuck with instability in the financial markets as the economy reaches full employment. They are concerned that in the absence of temporary factors, inflation will quickly jump higher if the economy continues on this trajectory. While they would like unemployment to settle somewhat below NAIRU* to eliminate lingering underemployment, they don’t want it to settle far below NAIRU. They don’t believe they can easily tap the breaks to lift unemployment higher. Recession is almost guaranteed to follow. Hence they would like to be able to rates rates gradually to feel their way around the darkness in which the true value of NAIRU lies. They fear that if they delay additional tightening, they will pass the point of no return in which they are forced to abandon their doctrine of gradualism. The Fed’s policy challenge just became a little bit harder today.”
I think it is also important to remember that the Fed is always concerned with its own credibility. They do not want to be seen as easily swayed by recency bias, and they want to be perceived as having a plan. If they were to reverse course so quickly after raising rates, it could be seen as lowering confidence in the Fed. This isn’t a particularly good reason to take a course of action, but it is a factor.
*NAIRU is the non-accelerating inflation rate of unemployment. Basically, if unemployment falls below this level, inflation is expected to increase. Depending upon the economist you prefer to read, this number is believed to be somewhere between 5-6%, and likely fluctuates depending upon a host of factors.
Yeah, it is. Mortgage rates are about 40 basis points higher than record lows. Is it possible rates continue to fall? Sure it is. It’s also possible that the market rebounds and they return to the levels that we saw around the beginning of the year. I realize that’s not particularly insightful, but I think it illustrates the point: anything could happen, and anyone who tells you they know what is going to happen should be suspect. As recently as two months ago, the members of the Federal Reserve, ostensibly some of our best and brightest, thought that we could see 3 or 4 rate hikes this year. That seems really unlikely now.
If you’re trying to time the market, you’re likely to fail. If you’re ready for a new mortgage, rates are very advantageous right now. If you’re seriously considering buying a home or refinancing, but aren’t quite ready to make the leap, you may want to accelerate your timeline. The markets are very volatile, and rates are subject to change quickly.
By Crissinda Ponder
rates on mortgages fell for the 4th consecutive week as economic worries
maintain a stronghold over international markets.
as expected, the Federal Reserve's policy-setting committee refrained from further raising
the federal funds rate. Concerns were raised about the broader
economy, including falling oil prices, however.
committee is closely monitoring global economic and financial developments and
is assessing their implications for the labor market and inflation, and for the
balance of risks to the outlook," a statement from the committee reads.
Home price increases continue
home prices ticked up 0.9% on a seasonally adjusted basis from October to
November 2015, according to the S&P/Case-Shiller home-price index released
Tuesday. Year over year, prices increased 5.3% from November 2014.
San Francisco and Portland, Oregon, were the only 3 cities in the 20-city
composite that saw year-over-year double-digit price gains.
the housing market, as measured by prices, is in good shape and the more prices
rise, the more homeowners have the equity to make a move," Joel Naroff,
president and chief economist for Naroff Economic Advisors in Holland,
Pennsylvania, says in a blog post. "That is good news."
data from the Federal Housing Finance Agency show that home prices rose 0.5%
from October to November on a seasonally adjusted basis, and were up 5.9% from
the same month in 2014.
A look at this week's rates
The benchmark 30-year fixed-rate mortgage fell
to 3.94% from 3.98%, according to a Jan. 27 survey of large lenders. A year
ago, the rate was 3.8%. Four weeks ago, it was 4.15%. The mortgages in this
week's survey had an average total of 0.21 discount and origination points.
Over the past 52 weeks, the 30-year fixed has averaged 4.01%. This week's rate
is 0.07 percentage points lower than the 52-week average.
The benchmark 15-year fixed-rate mortgage fell
to 3.21% from 3.23%.
The benchmark 30-year fixed-rate jumbo mortgage
fell to 3.83% from 3.87%.
The benchmark 5/1 adjustable-rate mortgage fell
to 3.3% from 3.31%.
Ready for a refi?
applications jumped 8.8% last week compared with the week before, according to
data from the Mortgage Bankers Association's weekly survey. The unadjusted
purchase index inched up 0.4% and was 22% higher than the same week last year.
MBA's survey includes an adjustment for Martin Luther King Jr. Day.
the delight of borrowers, mortgage rates have improved overall since the Fed's
initial rate hike at its December meeting, says Brett Sinnott, vice president
of capital markets for CMG Financial in San Ramon, California. This is
especially true for those interested in
gone back to levels that are close to early 2015 at this point," he says.
"Any borrower that was going to miss the train for a refinance got lucky
and a 2nd train came through."
New home sales surge
single-family home sales increased 10.8% from November to December, the U.S.
Census Bureau and the Department of Housing and Urban Development said
Wednesday. The seasonally adjusted annual rate was 544,000, which is 9.9% above
the December 2014 rate.
the median and average sales prices declined last month, from $302,000 to
$288,900 and from $373,500 to $346,400, respectively. The estimated total of
new homes sold in 2015 is 501,000 -- the highest number of sales since 2007.
is a great time to enter the housing market, says Jeff DerGurahian, executive vice
president of capital markets at LoanDepot in Foothill Ranch, California.
rates still hovering at 4%, affordability is still in a good spot," he
January 9, 2016
by Dan Green
After a brief, 1-week burst higher, current mortgage rates are back below 4%.
According to Freddie Mac's weekly survey of more than 100 mortgage lenders nationwide, conventional 30-year fixed rate mortgages dropped 4 basis points (0.04%) last week from the week prior.
30-year conventional mortgage rates now average 3.97% nationwide for borrowers willing to pay 0.6 discount points at closing.
Different from the 30-year loan, mortgage rates for the conventional 15-year fixed-rate mortgage rose 2 basis points (0.02%) last week to reach an average 3.26% nationwide with an accompanying 0.5 discount points.
5-year ARM mortgage rates also climbed, moving 1 basis point (0.01%) to 3.09%.
However, if you're looking for today's lowest possible rates, you may want to revisit the VA loan. VA mortgage rates are the lowest available.
With today's low mortgage rates, home buyers can purchase more house. Plus, the more-than-6.5-million households potentially eligible to refinance could lock-in large, long-term savings.
It's an excellent time to comparison shop your home loan.
Click to see today's rates (Jan 9th, 2016)
It's been a bumpy few months for mortgage rate shoppers.
Freddie Mac's weekly mortgage rate survey shows a 4 basis point (0.04%) decrease in the average 30-year fixed rate interest rate to 3.97% nationwide.
The decrease pulls the 30-year rate back below four percent (where it lived for only one week) and makes it easier for buyers and refinancing households to get mortgage-qualified.
As compared to last year, rates are higher by 24 basis points (0.24%), raising borrowing costs by $13 per $100,000 borrowed. Combine this with last year's average home price increase of more than five percent, and today's homes are less affordable to buyers than they were a year ago.
The size of a home downpayment-- even when using a low-downpayment loan such as Fannie Mae's 3% down HomeReady™ mortgage -- increases as the value of a home increases. This means you need to save more money to buy the same home.
Add in the cost of closing fees and buying a home can be downright expensive. Thankfully, mortgage lenders make zero-closing cost mortgages available to borrowers who ask.
A zero-closing cost mortgage is a mortgage for which all closing costs are paid by the lender.
In general, a $250,000 mortgage can be converted to "zero-closing cost" by adding a quarter-percentage point increase to the interest rate.
Doing a zero-closing mortgage adds approximately $15 to a monthly payment for every $100,000 borrowed. The amount saved will depend on your closing costs, which vary by state.
Note, though, that you may be eligible for lower rates than what Freddie Mac's survey reports. This is because the Freddie Mac survey covers conventional loans only.
Rates for other loan types, including VA, USDA, FHA, and jumbo loans are different from Freddie Mac's survey -- and they're typically lower.
VA mortgage rates are currently three-eighths of a percentage point (0.375%) lower than a comparable loan via Fannie Mac or Freddie Mac, and rates for FHA loans beat conventional loans, too.
The typical FHA mortgage rate is now roughly 12.5 basis points (0.125%) below the conventional rate and, for homeowners with credit scores below 740, the FHA loan may be a better option low-downpayment option as compared to the Conventional 97.
FHA mortgage insurance premiums (MIP) were lowered earlier this year to help with home affordability.
In November of this year, 30-year mortgage rates put together their worst one-month performance since late-2013. Borrowers are still feeling some of those effects.
Higher rates through that month brought higher monthly payments and higher payments cause a borrower's debt-to-income (DTI) to increase.
An increase to your DTI can make it tougher to get approved on a home loan; or, to qualify for a home loan refinance.
Debt-to-income calculations are among the most important pieces of a mortgage approval.
When mortgage rates rise, it also lowers a buyer's maximum home purchase price. This is because the buyer becomes restricted by payment and must lower its mortgage size in order to keep the same monthly payment.
Use our 3-in-1-mortgage calculator to calculate your payment.
During the last week of October, for example, a $1,391 payment would cover a mortgage for $300,000. Today, with mortgage rates up close to one-quarter percentage point, that same loan costs $1,427 per month, plus taxes and hazard insurance.
For every one percentage point increase in mortgage rates, a buyer's maximum home purchase price falls by approximately 11 percent.
Today's interest rates are back below 4 percent, but don't wait to see what happens next. Take a look at today's live mortgage rates and see what's possible for your home and your loan,.