Fixed mortgage rates hold steady, hovering at three-year lows

By Kathy Orton April 21

(Jason Reed/Reuters)

Mortgage rates were flat this week, continuing to hover at lows not seen in the past three years.
With the markets seemingly waiting for the outcome of the Federal Reserve’s meeting next week, home loan rates have barely budged.
If the Fed indicates it is considering bumping up its benchmark rate again that may push rates higher, but that seems unlikely at this point. Bankrate.com, which puts out a weekly mortgage rate trend index, found that more than two-thirds of the experts it surveyed believe rates will remain relatively unchanged in the coming week.

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According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average inched up to 3.59 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.58 percent a week ago and 3.65 percent a year ago. The 30-year fixed rate has hovered between 3.59 percent and 3.58 percent the past three weeks.
The 15-year fixed-rate average edged down to 2.85 percent with an average 0.5 point. It was 2.86 percent a week ago and 2.92 percent a year ago.  The 15-year fixed-rate has fallen 14 basis points in the past five weeks.
The five-year adjustable rate average dropped to 2.81 percent with an average 0.5 point. It was 2.84 percent a week ago, the same as it was a year ago.

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“Volatility in financial markets subsided over the past week, allowing Treasury yields to stabilize,” Sean Becketti, Freddie Mac chief economist, said in a statement.
“As a result, the 30-year mortgage rate was mostly flat, up only 1 basis point to 3.59 percent. The release of March’s existing-home sales report, which shows monthly growth at 5.1 percent, suggests homebuyers are taking advantage of low mortgage rates as the spring homebuying season gets underway.”
Meanwhile, mortgage applications were slightly higher, according to the latest data from the Mortgage Bankers Association.
The market composite index — a measure of total loan application volume — rose 1.3 percent from the previous week. The refinance index increased 3 percent, while the purchase index crept up 1 percent.
The refinance share of mortgage activity accounted for 55.4 percent of all applications.

Mortgage rates hit lows not seen in three years

0-year mortgage rates hit 3-year low

April 14, 2016

Updated 11:30 a.m.

REGISTER GRAPHIC

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.
RATE NEWS SUMMARY
From Freddie Mac’s weekly survey: The 30-year fixed rate improved again, averaging 3.58 percent. Even though that’s just 1 basis point lower than last week’s 3.59 percent, it was the lowest rate since May 2013.
By comparison, the all-time low in Freddie Mac’s records was 3.31 percent reported in November 2012.
The 15-year fixed likewise improved, dropping 2 basis points from last week’s average to 2.86 percent.
BOTTOM LINE: Assuming a borrower gets the average 30-year conforming fixed rate on a $417,000 loan, last year’s rate of 3.67 percent and payment of $1,912 was $21 more than this week’s payment of $1,891.
The Mortgage Bankers Association reports a 10 percent jump in loan application volume from the previous week.
WHAT I SEE: From rate sheets hitting my desk that are not part of Freddie Mac’s survey: Locally, well qualified borrowers can get the following fixed rate mortgages for zero cost: A conventional 10-year loan at 2.875 percent, a 15-year at 3.0 percent, a 20-year at 3.50 percent, a 30-year at 3.625 percent, a high balance ($417,001 to $625,500) conventional 15-year at 3.25 percent, and a high-balance 30-year at 3.875 percent.

Mortgage rates dip to annual low: Will they stick?

When the Federal Reserve raised its interest rates late last year, most mortgage rate prognosticators saw it as a sure sign that home-loan rates would finally rise meaningfully. In fact, just the opposite has happened. The average rate on the popular 30-year fixed loan is now at its lowest level of the year and could potentially head lower into new record territory.
"It's impossible to know how timing will play out, but I definitely see the ingredients in place for new all-time lows sometime soon," said Matthew Graham, chief operating officer of Mortgage News Daily. "It actually concerns me how convinced I am that this will happen eventually."

Ken Murray | NY Daily News Archive | Getty Images

A potpourri of political and economic factors are behind the fall in mortgage rates, which follow loosely the yield on the U.S. 10-year Treasury. Both the Fed and the European Central Bank expressed concern this month about the trajectory of the global economy. Consumers and investors are on edge because of three factors: Oil prices can't seem to make a decided move higher; some analysts are concerned about a stock correction; and the race for the White House has been highly volatile.
"You have the makings for quite the rate-friendly environment," Graham said.
Lower rates did prompt a reboot in mortgage refinances last week, but did nothing to spur homebuyers. Mortgage applications to purchase a home continue to weaken. Buyers and sellers think now, the height of the spring market, is a bad time to make a deal, according to Fannie Mae, which just recorded its worst monthly home purchase sentiment in 18 months.

Refi reboot pushes mortgage applications up 2.7%

"Growing pessimism over the last three months about the direction of the economy seems to be spilling over into home purchase sentiment," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "The gap between the share of consumers who think the economy is on the wrong track and the share who think it is on the right track has widened, nearly matching its reading last August, when concerns regarding China and oil prices led to the biggest stock market plunge in years. In turn, we saw dips this month in income growth perceptions, attitudes about the home selling climate, and job confidence."

While rates may be low, mortgage credit availability actually tightened in March, according to the Mortgage Bankers Association. The tightening came largely in conventional loans, while government programs such as FHA and VA lending relaxed slightly.

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Homebuyer traffic did ramp up in March, driven by lower rates and warmer weather, according to analysts at Credit Suisse. Affordability and supply, however, could keep that traffic from translating into closed sales.
Domestic economic data could drive rates in either direction this week, with reads on retail sales and producer prices on Wednesday and the all-important consumer price index Thursday.

Interest Rates May Rise Faster Than You Think, Boston Fed Chief Says

3

Sure, everyone agrees that the Federal Reserve will raise interest rates in the U.S. only gradually. But maybe not quite as gradually as traders are betting.
Federal funds rate futures that indicate the central bank will boost rates just once this year and next year appear "unduly pessimistic," Boston Federal Reserve Bank President Eric Rosengren, a voting member of the monetary policy committee, said in a speech Monday. "I personally expect that a stronger economy, at essentially full employment and with gradually rising inflation, will lead to more tightening."
Committee members had indicated in December that they might raise rates as many as four times this year after boosting them by 25 basis points for the first time since they were slashed to nearly zero during the 2008 financial crisis. Gyrations in global financial markets during January and February, however, coupled with a slowdown in China and tumbling oil prices, derailed that plan. At one point, markets were pricing in no increases at all in 2016.

Oil prices began rebounding from a low around $26 a barrel in March, though, and U.S. economic indicators continued to show strength, with the unemployment rate dipping as low as 4.9%, compared with a 2009 peak of 10%. An average of 230,000 jobs a month have been added in the past three months and consumer spending has grown, Fed Chair Janet Yellen noted in a speech last week.
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Indeed, an increase of 215,000 jobs in March outpaced economists' expectations while the unemployment rate rose only slightly, to 5%.

The bump "was for good reason, as the labor force participation rate rose for the sixth consecutive month," Bank of America Merrill Lynch global economist Ethan Harris said in a note to clients on Friday.
Oil prices, meanwhile, topped $40 a barrel in March before paring gains, though they remain more than 60% below their 2014 peak of above $107.

 "With financial market volatility subsiding since earlier this year, it is to me surprising that the expected path of monetary policy embedded in futures markets is so low," Rosengren said. "The risks seem to be abating that problems from abroad would be severe enough to disrupt the U.S. recovery."
Monetary policy committee members themselves indicated in March that rates may be increased twice this year, ending the year at between 0.75% and 1%.

"The Fed's communicated path for policy looks at least remotely achievable for the first time in quite some time, though we have argued it may only be able to deliver one hike this year," Morgan Stanley economist Ellen Zentner said in a note to clients Friday. "Over the medium term is where we believe a more significant reality check is in store."

In short, to keep interest-rate policy at a level that supports maximum employment and 2% inflation, the central bank will likely have to raise rates in both 2017 and 2018 fewer than the four times a year it now projects, she said.

While lower rates tend to bolster the markets as a whole, they do the opposite for banking and finance stocks. The finance industry has been pressured by seven years of near-zero interest rates, which reduce net interest income, a key revenue stream made up of the difference between what banks such as JPMorgan Chase (JPM - Get Report) and Citigroup (C - Get Report) charge to lend money and what they pay to depositors.