Robert Bobby Darvish of Platinum Lending Solutions have been providing residential & commercial mortgage services for over 20 years across Orange County Southern California. We're able to assist you in all financing needs, to purchase, refinance or construct variety of projects.
After two weeks of spikes, mortgage rates retreated this week, falling back to where they had hovered most of the summer.
With
long-term bonds trading in a narrow band, home loan rates likely have
settled in ahead of the Federal Reserve meeting next week. While most
observers do not expect the Fed to raise rates in November, they are
anticipating a rate hike in December.
At the same time, the
financial markets appear reluctant to make any moves ahead of the
presidential election, which means mortgage rates are likely to hold
steady at least until after Nov. 8.
Bankrate.com,
which puts out a weekly mortgage rate trend index, found that 80
percent of the experts it surveyed believe rates will remain unchanged
in the coming week, moving less and plus or minus two basis points. (A
basis point is 0.01 percentage point.)
According
to the latest data released Thursday by Freddie Mac, the 30-year
fixed-rate average tumbled to 3.47 percent with an average 0.6 point.
(Points are fees paid to a lender equal to 1 percent of the loan
amount.) It was 3.52 percent a week ago and 3.76 percent a year ago. The
30-year fixed rate, which had jumped 10 basis points in two weeks,
dropped back below 3.5 percent, where it has spent all but two weeks of
the past four months.
The 15-year fixed-rate average slipped to
2.78 percent with an average 0.5 point. It was 2.79 percent a week ago
and 2.98 percent a year ago.
The five-year adjustable rate
average inched down to 2.84 percent with an average 0.4 point. It was
2.85 percent a week ago and 2.89 percent a year ago.
“Mortgage
rates continue to be relatively stable and at near record lows,” Sean
Becketti, Freddie Mac chief economist, said in a statement. “The 30-year
fixed-rate mortgage fell 5 basis points week-over-week to 3.47 percent,
erasing last week’s increase. At the same time, the 10-year Treasury
yield ended the week relatively flat – up about 2 basis points.”
Meanwhile, mortgage applications declined this week, according to the latest data from the Mortgage Bankers Association.
The
market composite index — a measure of total loan application volume —
fell 4.1 percent from the previous week. The refinance index fell 2
percent, while the purchase index decreased 7 percent.
The refinance share of mortgage activity accounted for 62.7 percent of all applications.
The trials that plagued the California housing market in 2016 aren’t expected to get too much better in 2017 as the real estate market is projected to face another year of supply shortages and affordability constraints, according to the "2017 California Housing Market Forecast" released by the California Association of Realtors.
CAR predicted that2016 would facea shortage of available inventory and continued high costs that would limit the state’s improvement, a predication that ultimately came true according to thestate’s real estate agents.
Affordability is only projected to get worse, which is currently already California real estate agents' No. 1 concern for the market.
"Next year, California's housing market will be driven by tight housing supplies and the lowest housing affordability in six years,” said CAR President Pat "Ziggy" Zicarelli.
However, he added, "The market will experience regional differences, with more affordable areas, such as the Inland Empire and Central Valley, outperforming the urban coastal centers, where high home prices and a limited availability of homes on the market will hamper sales.”
“As a result, the Southern California and Central Valley regions will see moderate sales increases, while the San Francisco Bay Area will experience a decline as homebuyers migrate to peripheral cities with more affordable options," said Zicarelli.
The CAR predicts existing home sales will modestly increase and rise 1.4% next year to reach 413,000 units, up slightly from the projected 2016 sales figure of 407,300 homes sold.
Sales in 2016 also will be virtually flat at 407,300 existing, single-family home sales, compared with the 408,800 pace of homes sold in 2015.
Interest rates aren’t estimated to change significantly, with the average 30-year, fixed mortgage interest rates to only rise to 4% in 2017, up from 3.6% in 2016.
Meanwhile, California home prices are forecast to slow down in pace, with the median home price to increase 4.3% to $525,600 in 2017, following a projected 6.2% increase in 2016 to $503,900, representing the slowest rate of price appreciation in six years.
The state’s overall U.S. Gross Domestic Product is projected to grow 2.2% in 2017, after a projected gain of 1.5% in 2016, while California's nonfarm job growth will rise 1.6%, down from a projected 2.3% in 2016.
"With the California economy continuing to outperform the nation, the demand for housing will remain robust even with supply and affordability constraints still very much in evidence. The net result will be California's housing market posting a modest increase in 2017," said CAR Vice President and Chief Economist Leslie Appleton-Young.
"The underlying fundamentals continue to support overall home sales growth, but headwinds, such as global economic uncertainty and deteriorating housing affordability, will temper stronger sales activity," Appleton-Young continued.
Bobby Darvish of Platinum Lending Solutions offers best market rates for Residential & Commercial mortgage in California.
Here's your strategy to take advantage of today's dropping interest rates.
Over the past month, mortgage rates have plunged dramatically lower,
reaching levels not seen since Nov. 22, 2012, when the conventional
30-year fixed rate hit an all-time low of 3.31%.
For homebuyers and refinancers, this is a welcome change. However,
the forces driving rates down today are based on serious concerns about
the global economy. Read on to learn why rates are plunging, what could
drive them even lower, and how investors should react. What's happening? The low rates today have
emerged from a much different macroeconomic context than in the
aftermath of the financial crisis. In 2012, the Fed was rapidly
expanding its balance sheet with purchases of Treasuries and
mortgage-backed securities, actively forcing rates lower. Today, the Fed
is no longer making those purchases and is instead working to unwind
its near-zero interest rate policies put in place following the
financial crisis.
Without the Fed actively pushing rates lower with asset purchases, I
think it is unlikely that mortgage rates will fall much farther than
they already have. In 2012, the Fed's buying was able to significantly
raise prices -- and therefore lower yields. Absent that force pushing
the balance of supply and demand, today's near-historic low rates are
likely temporary.
The 10-year Treasury yield -- a common harbinger for changes in
mortgage rates -- has supported that theory as rates have moved lower.
Twice in the last month, the 10-year has approached its lows from 2012
and both times the market has quickly sent its yield back higher. Had
the 10-year continue to sink below those 2012 lows, then it would be
much more likely that mortgage rates would follow suit. If it's not the Fed, why are rates dropping again?
If it isn't the Fed tipping the scales of supply and demand, what would
it take for rates to drop to a new low? The most likely driver of such a
drop would be a global event causing a scare in the markets. In other
words, it's market psychology as much as it's hard economics.
If such an event were to occur, the markets would likely price in the
chance that central banks would increase or prolong easy-money policies
in response to a slowdown. That would push rates lower in the same way
as 2012.
What could such an event look like? It could be in the form of a
deterioration in the U.S. labor market or GDP. It could be spurred by
bad news out of China, much like the market experienced in Aug. 2015 and
Jan. 2016. In both of those cases, mortgage rates dropped sharply and
immediately as fear rippled through the market.
Or, more tangibly, it could be sparked by the U.K. referendum to
potentially leave the eurozone, scheduled for a vote on June 23. If the
U.K. votes to exit, economists predict that rates could fall some more
over fears of negative economic repercussions impacting Europe and the
U.S. Here's what investors should expect To me, the
best way to figure out the optimal plan for investors is to understand
what happened the last time rates were this low and then determine how
today's economics could change the outcome.
In the years immediately following the financial crisis, low interest
rates spurred a refinancing boom to the benefit of banks around the
country. Leading mortgage lenders like Wells Fargo and Bank of America relied
on the fees and loan volume from this surge to offset weaknesses in
commercial real estate, legacy mortgage assets, and tumultuous trading
in the markets. It also helped to generate the capital needed to pay the
billions of dollars in fines and settlements levied for misconduct that
led to the crisis.
On the other side of the coin, builders like Toll Brothers(NYSE:TOL)
suffered through the refinancing boom, as low rates did little to drive
new home sales. Toll Brothers' 2012 annual revenue was about two-thirds
below its peak in 2007, a drop of more than $4 billion. The company's
revenue has since doubled from that level, but even still remains well
below the 2007 highs.
Low rates today should help to spur higher real estate activity and
lending as they did in 2012. However, this activity today is based on
much more stable overall real estate market. Home purchases are
increasingly driving the market, rather than the refinances that
characterized the market in 2012. It's no coincidence that home price
increases have coincided with the decreased share of refinancing.
For Bank of America, Wells Fargo, and other lenders, this means that
today's low rates could be doubly as potent toward their consumer and
home loan businesses pushing both purchase money and refinance loans
higher at the same time. Driven by its mortgage business, Wells Fargo
was the only mega bank to increase its revenues in the first quarter,
and Bank of America's consumer banking unit saw its profits jump $324
million, 22.2%, compared to the 2015 first quarter. I think these
improvements are just the start if rates stay low or decrease further.
Economic data supports the opportunity. Mortgage applications so far
in April are up over 13% compared to the same time in 2015. Housing
starts are up 31% over the same period, along with 17.5% and 18.5% jumps
in completed homes and under construction homes, respectively.
Toll Brothers is also poised for fundamental improvements, even if
the stock market has yet to recognize the potential. The stock is down
over 21% in the last 12 months, compared to the S&P 500's 1.2% drop.
And yet, Toll Brothers management is predicting 2016 revenue to grow
about 25% annually along with solid growth in efficiency and profits.
Bob Toll, the company's executive chairman, told investors on the
first-quarter conference call that "the stock market seems to be pricing
in a steep decline in the economy, and along with it, our sector. We,
on the other hand, are seeing signs that reflect strength and positive
momentum in our business based on six consecutive quarters of
year-over-year contract growth in both units and dollars." It is, of
course, in Toll's self-interest to promote the stock as an investment,
but to me, the numbers support his position.
If some unknown event does spur economic problems and spook the
market, I think that the market's volatility would be a reasonable
buying opportunity for the stock of a lender or builder that stands to
benefit from low rates driving new sales in the domestic real estate
market in the U.S. The key is to not panic, stay focused on quality
companies, and, as always, wait for the market to offer you a chance to
buy at a discount.
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.
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.
“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.
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.
"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.
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.
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. Must Read: Bill Gross Says Low Rates Are Stretching Markets to the Breaking Point
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.
Mortgage rates wander upward for third week in a row
(Freddie Mac)
Mortgage rates wandered upward for third week in a row prior to the Federal Reserve’s announcement Wednesday that it was leaving its benchmark interest rate unchanged and lowering its economic forecasts.
That
news came too late in the week to be factored into the Federal Home
Loan Mortgage Corp.’s survey. The government-backed mortgage-backer
aggregates current home loan rates weekly from 125 lenders from across
the country to come up with a national mortgage average.
With
the Fed indicating that it expects to raise rates only two or three
times this year, home loan rates are likely to remain low for the
foreseeable future. That’s good news for the spring home-buying season.
According
to the latest data released Thursday by Freddie Mac, the 30-year
fixed-rate average climbed to 3.73 percent with an average 0.5 point.
(Points are fees paid to a lender equal to 1 percent of the loan
amount.) It was 3.68 percent a week ago and 3.78 percent a year ago. The
30-year fixed rate has remained below 4 percent since late December.
The
15-year fixed-rate average rose to 2.99 percent with an average 0.4
point. It was 2.96 percent a week ago and 3.06 percent a year ago. The
15-year fixed rate has stayed under 3 percent since early February.
The
five-year adjustable rate average edged up to 2.93 percent with an
average 0.5 point. It was 2.92 percent a week ago and 2.97 percent a
year ago.
“Treasury yields increased heading into this week’s
FOMC meeting, partially in response to modestly higher inflation
readings,” Sean Becketti, Freddie Mac chief economist, said in a
statement.
“[T]he Fed confirmed what the market had already
concluded and made no change to the Federal funds target. The Fed went
further and acknowledged that economic signals have been mixed and that
the pace of monetary tightening may be slower than had been assumed at
the end of 2015.”
Meanwhile, higher rates pushed mortgage applications down, according to the latest data from the Mortgage Bankers Association.
The
market composite index — a measure of total loan application volume –
fell 3.3 percent from the previous week. The refinance index dropped 6
percent, while the purchase index inched up 0.3 percent.
The refinance share of mortgage activity accounted for 55 percent of all applications.
For the week that ended on March 3, Freddie Mac reported the
benchmark 30-year fixed-rate mortgage rate increased to 3.64%. For the
week that ended on February 25, the mortgage rate has been at 3.62%.
This shows the upward trend of 0.55% over the week. As per the
Washington Post, improved economic data drove the benchmark mortgage
rates up.
According to the data released on Thursday by the Federal Home Loan Mortgage Corp. (OTCMKTS:FMCC),
15-year fixed-rate mortgage rate was at 2.94%, and five-year adjustable
rate increased to 2.84%. The week that ended on February 25 had 15-year
rate at 2.93% and five-year adjustable rate at 2.79%. This indicates
improvement of 0.34% in 15-year fixed rate mortgage rate while five-year
adjustable rate increased 1.8% over the week.
Freddie Mac chief economist, Sean Becketti
stated: “The market turbulence that kicked off the year subsided at the
end of February, providing at least a temporary break in the flight to
quality.” He added that the treasury yields have approached the highest
point in a month, which drove the growth in 30-year fixed-rate mortgage
rate to 3.64%.
However, recently Federal Reserve officials have hinted unchanged
interest rates at 0.5%. Federal Reserve’s Vice Chairman Stanley Fischer
hinted that there is no rush to hike rates in short-term. He emphasized
that if more-than-full employment sustains, then only inflation rate
will reach the target of 2%. Federal Reserve Governor Jerome Powell
stressed that the central bank’s decision for rate hike is data-driven.
Federal Fund future prices projection outlines that there is 94.2%
probability of unchanged rates and 5.8% probability of quarter-point
rate hike to 0.75%.
Consumer spending improved in January, as the core PCE index improved
1.7% year-over-year (YoY). According to the US Department of Commerce,
seasonally adjusted total construction spending increased 10.4% YoY in
January. As per the February Manufacturing ISM Report on Business, the
PMI improved and stood at 49.5% in February, up 1.3% from January. The
PMI figure below 50% means the manufacturing economy is contracting.
Consequently, the manufacturing index improved while the sector remained
in contraction phase.
Since the consumer spending, construction spending and
manufacturing sector improved, so the investors sentiments improved as
well. In addition, the 10-year treasury yield improved 5.2% on March 1.
In March, the 10-year treasury yield gained nearly 0.4%, from March 1
till March 3. Owing to enhanced investor sentiments and improved
treasury yield, mortgage rate also followed the trend and moved up.
On the contrary, mortgage applications were down as the market
composite index fell 4.8% over the week. The refinance index fell 7%,
and purchase index fell 1% over the week. Improved mortgage rates
hampered the mortgage related activity (refinancing, applications and
purchase) which were up last week. If Federal Reserve decides to keep
interest rate at the current level, then mortgage-related activities are
likely to increase.
The unexpected sunk of mortgage rates offers buyers
the opportunity to get a great deal at a lower cost than before, making
sure that this spring becomes a busy season in the housing market.
Average rates on a 30-year fixed rate mortgage have dropped from 4.01
percent, in December, to 3.62 percent on Thursday, putting the figure
near to the record-low rate of 3.35 percent in late 2012, according to
the weekly survey by mortgage lender Freddie Mac. Photo: Alamy/The Telegraph UK
Now interested buyers could be able to afford higher-priced homes or
just save money from an already found house. Even renters could be
persuaded to move up their plans for a purchase at a lower cost.
Lower mortgage rates came after economic experts predicted this year
at the end of the record lower mortgage rates due to the Federal
Reserve’s move to increase the cost of borrowing across the economy.
The issue that many did not see coming was that the decline in stocks
prompted nervous investors to seek safety in government bonds, which
drove up prices and kept yields low. Mortgage rates tend to track yields
on 10-year Treasury bonds, as reported by Triblive.
Economics warnings led people to act on the forecast that 2016 will
begin with higher interest rates. Many decided to take actions before
the end of the year so they could save some money, Liljehom, a
38-year-old man from Portland, was one of them.
Liljehom decided to refinance his mortgage in December so he could
take previsions due to the highlighted warnings, with only days to spare
before the Fed raised rates.
“I could have saved more money if I had waited,” Liljehom
said. “My interest rate is still quite low, but it does sting a little
knowing it could have been lower.”
Mortgage rates may remain low
Rates are likely to stay low for a while, said Nela Richardson, chief
economist for Seattle-based real estate broker Redfin. Global concerns
over worldwide economic like a slowdown in China and low commodity
prices continue to spook financial markets and may persuade the Fed to
hold off on more rate hikes.
The more slowly the central bank removes that support, the more
likely mortgage rates are to stay low. Inverstong is betting that the
Fed will not raise its benchmark interest rate again when it meets next
month. The Fed’s massive stimulus efforts over the past seven years
drove mortgage rates to record lows.
The Mortgage Bankers Association lowered this month its forecast for
the 30-year-fixed-rate of the year to 4.3 percent, a drop from the 4.6
percent they were expecting in January.
The smartest insight and analysis, from all perspectives, rounded up from around the web:
Imagine this: "Once upon a time, people actually gotpaidto lend money,"said Matt O'BrienatThe Washington Post. "It was something early humans called 'interest.'" Crazy, right? I kid, of course; getting paid for loaning someone money has been a bedrock financial rule for millennia. But over the past year, a number of the world's central bankers have done "what didn't seem possible before" and turned this age-old idea on its head. Desperate to stimulate economic growth, central banks in Japan, the Eurozone, Denmark, Sweden, and Switzerland — countries that account for nearly a quarter of global GDP — have slashed interest rates to below zero, essentially forcing big financial institutions to pay central banks to hold their money overnight. In economic terms, this is about "one step away from dogs and cats living together." The idea is that the commercial banks won't want to pay to park their excess reserves and will instead be motivated to lend that money to businesses and consumers, which will in turn spur economic growth. But the truth is, sub-zero interest rates are uncharted financial territory. No one really knows what will happen next.
How negative interest rates might affect ordinary consumers is also largely unknown,said Neil IrwinatThe New York Times.Right now, negative rates only really govern money that big institutions stash with central banks, but the effects could easily trickle down, in the form of "fees for keeping money" in ordinary savings accounts. And don't think the U.S. is immune from such a "mind-bending" turn of events. Federal Reserve Chair Janet Yellen told Congress last week that while she didn't think pushing rates below zero would be necessary, "she also didn't rule it out." The Fed has also quietly asked major U.S. banks to test what would happen to their finances if rates went negative. Economists, accustomed to treating sub-zero rates as an "intellectual curiosity," are only just beginning to imagine the "weird things" that might start happening. "For example, would people start prepaying years' worth of cable bills to avoid having money tied up in a money-losing bank account?"
It's hard to overstate just how topsy-turvy this "strange new world" is,saidClive CrookatBloomberg View.Years of quantitative easing and low interest rates from central banks were themselves "a journey into the unknown." Now that we're talking about additional adventures, into negative-interest territory, "unforeseen complications" could easily arise. That's why central banks — and the Fed in particular — need to be exceedingly careful in the months to come,said Gillian TettatFinancial Times. Our already jittery markets are getting seriously spooked by all the uncertainty. At a conference I attended last week with some of the "most powerful and savvy asset managers in America," two-thirds of the participants said they now believe the Fed will actually cut interest rates this year, a marked departure from expectations just a few weeks ago. Investors are entering a "bewildering Alice-in-Wonderland world," and we can't "afford to let market imaginations run (any more) wild."
Courtesy of Bobby Darvish of Platinum lending Solutions
Mortgage
rates slid for the sixth straight week, driven down nearly to last
year’s low by continued uncertainty and volatility in the global
financial markets.
Despite
the Federal Reserve’s move to raise interest rates, mortgage rates
shifted in the opposite direction. That’s because they’re tied to yields
in 10-year Treasury bonds, which have plummeted to their lowest level
since 2012. With uncertainty in global markets, investors have flocked
to the safer 10-year Treasury bonds, which has resulted in lower yields.
According
to the latest data released Thursday by Federal Home Loan Mortgage
Corp., or Freddie Mac, the 30-year fixed-rate sank to 3.65 percent with
an average 0.5 point, the lowest level since April. (Points are fees
paid to a lender equal to 1 percent of the loan amount.) It was 3.72
percent a week ago and 3.69 percent a year ago.
The 15-year
fixed-rate average fell to 2.95 percent with an average 0.5 point. It
was 3.01 percent a week ago and 2.99 percent a year ago.
The
five-year hybrid adjustable mortgage average dipped to 2.83 percent
with an average 0.4 point. It was 2.85 percent a week ago and 2.97
percent a year ago.
With
mortgage rates falling, a typical family buying a median-priced home
now would save approximately $40 a month on their mortgage payment and
more than $600 in interest payments on a 30-year fixed-rate mortgage
over the course of a year compared with what they would have paid at the
start of 2016, according to Freddie Mac.
“The 30-year mortgage
rate dropped another 7 basis points this week to 3.65 percent. This
week’s drop leaves the mortgage rate just 6 basis points above last
year’s low of 3.59 percent,” Sean Becketti, Freddie Mac chief economist,
said in a statement.
“In a falling rate environment, mortgage
rates often adjust more slowly than capital market rates, and the
early-2016 flight-to-quality has run true to form,” Becketti added. “The
30-year mortgage rate has dropped 36 basis points since the start of
the year, while the yield on the 10-year Treasury has dropped 59 basis
points over the same period. If Treasury yields were to hold at current
levels, mortgage rates might well sink a little further before
stabilizing.”
Meanwhile,
the lower rates may be spurring more home buyers to take advantage of
lower-cost loans. Mortgage applications were up, according to the latest
data from the Mortgage Bankers Association.
The
market composite index — a measure of total loan application volume
rose 9.3 percent from the previous week. The refinance index jumped 16
percent from the week before, while the purchase index ticked up 0.2
percent.
The refinance portion of mortgage activity accounted for
61.2 percent of total applications, a slight increase from the week
before.
In
this Tuesday, Jan. 26, 2016, photo, a single family home is advertised
for sale in Miami. On Thursday, Feb. 4, 2016, Freddie Mac reports on the
week’s average U.S. mortgage rates. (AP Photo/Lynne Sladky)
Average long-term U.S. mortgage rates fell for the fifth
straight week amid volatility in world financial markets.Mortgage buyer Freddie Mac says the average rate on a 30-year
fixed-rate mortgage slid to 3.72 percent this week, down from 3.79
percent last week and the lowest since it averaged 3.68 percent in April
2015.
The average rate on a 15-year fixed-rate mortgage slid to 3.01 percent from 3.07 percent last week.
Mortgage rates have continued to fall despite the Federal Reserve's
decision in December to raise the short-term rate it controls for the
first time since 2006.
Global markets have been rattled this year by signs of a global
slowdown and big drops in the price of commodities, including oil.
Investors have sought refuge in U.S. Treasurys, pushing down long-term
U.S. rates.
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 was unchanged at 0.6 point. The fee for a 15-year loan was also unchanged at 0.5 point.
The average rate on five-year adjustable-rate mortgages fell to 2.85
percent this week from 2.90 percent last week; the fee slid to 0.4 point
from 0.5 point last week.
Average US 30-year Mortgage Rate Falls To 4.27 Percent
Inform
Bobby Darvish Robert Darvish Platinum lending Solutions
Mortgage
rates aren't likely to spike in the months ahead, according to
economists, and that could be good news for those planning to shop for a
home in the spring.
All
eyes will continue to be on the Fed going into spring, but economists
say home buyers are still likely to see some very attractive
mortgage rates for a while. Say the 4% range for a 30-year fixed?
The
Federal Reserve's policy committee proved last week that we're not
looking at NASCAR-like speeds for the next round of rate hikes here.
On
Dec. 16, the Fed moved to lift short-term interest rates for the first
time in nine years. The target range for the short-term federal funds
rate was set at 0.25% to 0.5% — up slightly from near 0% levels.
But
as expected last week, the Fed held steady and didn't touch rates at
the first meeting of 2016. Maybe the Fed will raise rates at its next
two-day meeting March 15 and March 16. But maybe not.
Another two-day meeting follows April 26-April 27. Maybe another rate hike then; maybe not.
The
Fed's official word last week was that we could be looking at "only
gradual increases in the federal funds rate" ahead. "Inflation is
expected to remain low in the near term, in part because of the further
declines in energy prices," according to the Federal Open Market
Committee statement on Wednesday.
Oddly enough, mortgage rates
have been sliding downward in recent weeks, in part because of the
rough patches with economic woes in China, falling oil prices and
tumbling stock prices on Wall Street. And many experts aren't
forecasting big jumps in mortgage rates by spring.
Robert
A. Dye, chief economist for Dallas-based Comerica Bank, said he's
forecasting that mortgage rates will remain flat, holding at current
levels, over the next couple of months.
Two factors are keeping
mortgage rates in check: The Federal Reserve is not expected to raise
short-term rates until April or perhaps later, Dye said. And the
volatility in global financial markets is putting downward pressure on
rates, as well.
As
markets are uncertain, investors turn to long-term Treasury bonds as a
safe haven. When demand goes up for Treasuries, the price of the bonds
goes up but the yields on the bonds fall. For home buyers, the flight to
safety in the bond market means that mortgage rates remain low.
Bob
Walters, chief economist for Detroit-based Quicken Loans, said he would
expect mortgage rates to remain low through the spring, as well.
"The
global economy is facing some significant headwinds. Inflation is
non-existent. Those realities hold longer term interest rates down,"
Walters said.
"I think the Fed will stand down and not raise
short-term interest rates again until later this year — and only if some
of the global economic challenges ease," Walters said.
Walters
noted that Michigan has enjoyed significant home price gains in the last
year or so and demand is markedly up. The outlook would continue to be
good, he said, if rates remain low as expected.
Greg McBride,
chief financial analyst for Bankrate.com, said he'd expect the 30-year
rate to hopscotch back and forth around 4.1% to 4.2% for a while — which
is not all that far from the record low of 3.52% in May 2013.
His advice to home buyers and those still wanting to refinance: "Don't worry about mortgage rates."
What's
more essential for home buyers: Make sure to shore up your credit by
paying bills on time. Do not open up more credit cards or take on a big
car loan right before you want to shop for a mortgage. Don't stretch too
far. Check your credit report. Take time to consider what kind of money
you have for a down payment and shop around for the right house and
right mortgage for you. Lenders often want to see two years worth of
available tax returns, so it helps to have held a job for two years or
more.
McBride noted that the average 30-year mortgage rate was 3.94% recently, compared with 3.8% a year ago.
The
backdrop of low inflation and uneven economic growth, McBride said,
will limit the Fed's ability to move quickly and raise rates.
Keith
Gumbinger, vice president for HSH.com, a mortgage information website,
said it is looking more and more as if the Fed won't be raising rates
four times in 2016.
"If the economy is slowing — or certainly not
accelerating — it does suggest that the Fed probably won't be raising
rates four times this year," Gumbinger said. "We might not even see the
first interest rate increase until perhaps June."
Gumbinger said right now he expects that the 30-year fixed rate mortgage could peak around 4.625% by year end.
Many
experts, he said, are surprised that rates remained as low as they have
for this year, as some had expected mortgage rates to be closer to 4.5%
by now.
Mark Zandi, chief economist with Moody's Analytics, noted
that 30-year mortgage rates are now roughly around where they were this
time last year. But mortgage rates did rise to more than 4% briefly
last summer.
"The Fed move in December had no impact on mortgage rates, as long-term rates do not react," Zandi said.
"Bond
investors don’t believe the Fed will be able to raise rates much this
year. There is also significant demand for the safety of U.S. Treasury
and mortgage bonds given the turmoil in financial markets."
Zandi
said he would expect mortgage rates to hover between 3.75% and 4.25%
during the next three months to six months before edging somewhat higher
by year's end.
"Home sales and housing construction should
continue to increase given the improving job market, low mortgage rates,
and steadily improving mortgage credit availability," Zandi said.
Most
areas across the country — except the oil patch areas, which are hard
hit by job losses — should see improvement in the housing market, Zandi
said. Tougher housing markets are likely to continue in Texas,
Louisiana, Oklahoma, Wyoming and North Dakota.
Interest rate
forecasts, of course, are subject to change. The Fed has noted that the
actual path of the federal funds rate will depend on the economic
outlook based on the latest data. The Fed sees the declines in energy
prices as "transitory." Right now, though, it looks like low mortgage
rates have a few more laps to go.
Robert Bobby Darvish of Platinum lending Solutions
When the Federal
Reserve raised interest rates in December, people who had been flirting
with buying a home worried they might have waited too long.But worries about
rising mortgage rates have been unwarranted. Since the Fed's rate
increase, rates on 30-year mortgages have dropped below 4 percent, and
many mortgage experts expect them to stay below 4.25 percent this year.
"If the stock market drops another 300 to 400
points some day, mortgage rates might go down another eighth of a
percent," said Ken Perlmutter, president of Perl Mortgage of Chicago. He
thinks the dip will be short-lived, and rates are about as low as they
will go. He's not expecting a return to the 3.5 percent that happened
while the U.S. economy was recovering from the 2008 recession, but he's
also not anticipating much increase.
Lately, concerns about the global economy and the
plunge in the stock market have driven rates on 30-year mortgages below
3.8 percent nationally, said Zillow economist Svenja Gudell. That's
about a quarter of a percent under where they were when the Federal
Reserve raised interest rates and analysts were warning homebuyers that
rising mortgage rates were likely.
The recent drop in rates "surprised a lot of
people," said James Bianco, president of Bianco Research. "People
expected rates to be up, not down" after the Federal Reserve raised the
federal funds rate. Instead, economic data on a slowing global economy
has crimped expectations on the U.S. economy and interest rates.
"Nobody thinks inflation is a risk," and rising
inflation would prompt interest rates, like mortgages, to rise, Bianco
said. Instead, the growing view is that instead of responding to a surge
in the economy, the Federal Reserve was simply tweaking rates upward
because they'd been ultra-low since the 2008 recession, Bianco said.
"I think the Fed wants to get out of the market manipulation game," he said.
The Fed doesn't control mortgage rates directly,
although its view of growth and inflation is an influence. Mortgage
rates respond to the outlook for the economy, and particularly the
outlook reflected in yields on 10-year Treasury bonds.
When investors get nervous about the economy or
the stock market, they pull money out of stocks and put it into bonds.
With bonds popular, yields on the bonds dip. That's what happened after
the Fed acted in mid-December. The Dow Jones industrial average lost
more than 1,000 points —one of the sharpest moves in history for the
early part of the year. Mortgage rates took their cue from the bond
yields and fell too.
Perlmutter told a client who needs to close on a
large mortgage in February that waiting a little while before locking in
a rate might save him an eighth of a percent if investors get panicky
about the stock market again. "But it's a risk," he said. "It could go
the other way."
Fannie Mae economist Mark Palim is estimating a
gradual increase in 30-year mortgage rates to 4.2 percent by the end of
2016 —a modest increase that goes along with modest growth in the
economy. Fannie Mae economists recently lowered their expectation of GDP
growth to just 2.2 percent after previously estimating 2.4 percent.
"The concern is the impact of international markets," he said. "That's been the pattern of the last few years."
When investors worried about a European debt
crisis, a Greek debt crisis or China's stock market and economy, U.S.
stocks dropped as people yanked their money out of the stock market and
tucked it into U.S. Treasury bonds for safekeeping, he said. As the
money flowed into bonds, the yields on them dropped, and mortgage rates
did too.
Still, Palim and many analysts say the trend in
rates is likely to be up, but up gradually while the global economy
remains lackluster.
While that takes the pressure off potential
homebuyers to make a quick move, PNC Bank economist Stuart Hoffman said
people with adjustable-rate mortgages might find it worthwhile to
convert to fixed-rate mortgages if their existing mortgages will start
getting adjustments this year. A May adjustment could be up a half or
three-quarters of a percent, he said.
Mortgage rates retreat over global economic concerns
(Andrew Harrer/Bloomberg)
Mortgage rates retreated for the second week in a row, according to the latest data released Thursday by Freddie Mac.
Concern over the global economy is fueling volatility in the financial markets
and pushing down rates on home loans. The 10-year Treasury yield closed
at a two-month low on Wednesday. The movement of the 10-year Treasury
bond is one of the best indicators whether mortgage rates will rise or
fall. When yields go down, interest rates tend to go down.
The
30-year fixed-rate average dropped to 3.92 percent with an average 0.6
point, its lowest level since early November. (Points are fees paid to a
lender equal to 1 percent of the loan amount.) It was 3.97 percent a
week ago and 3.66 percent a year ago.
The
15-year fixed-rate average fell to 3.19 percent with an average 0.5
point. It was 3.26 percent a week ago and 2.98 percent a year ago.
The
five-year hybrid adjustable rate average sank to 3.01 percent with an
average 0.4 point. It was 3.09 percent a week ago and 2.9 percent a year
ago.
“Long-term Treasury yields
continue to drop, dragging mortgage rates down with them,” Sean
Becketti, Freddie Mac chief economist, said in a statement.
“Turbulence
in overseas financial markets is generating a flight-to-quality which
benefits U.S. Treasury securities. In addition, sagging oil prices are
capping inflation expectations.”
Meanwhile,
mortgage applications rebounded from their holiday slump, according to
the latest data from the Mortgage Bankers Association.
The
market composite index — a measure of total loan application volume –
soared 21.3 percent from the previous week. The refinance grew 24
percent, while the purchase index increased 18 percent.
The refinance share of mortgage activity accounted for 55.8 percent of all applications.
“MBA’s
purchase mortgage application index reached its second highest level
since May 2010 on a seasonally adjusted basis last week, second only to
the week prior to the implementation of the Know Before You Owe rules,”
Lynn Fisher, MBA’s vice president of research and economics, said in a
statement.
“Bolstered
by strong fourth quarter growth in jobs and continuing low rates, the
results are similar to levels we saw in early December, suggesting that
the purchase market’s strong finish to 2015 may be continuing. While
refinances also increased on a holiday-adjusted basis, refinance
activity was down 38 percent relative to a year ago when rates dove
below 4 percent.”
In
this Tuesday, Jan. 26, 2016, photo, a single family home is advertised
for sale in Miami. On Thursday, Feb. 4, 2016, Freddie Mac reports on the
week’s average U.S. mortgage rates. (AP Photo/Lynne Sladky) 
