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.
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.
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,.