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Showing posts with label Robert B Darvish. Show all posts
Showing posts with label Robert B Darvish. Show all posts
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.
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
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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.”
Mortgage Rates Edge Higher, Signaling What’s to Come in 2016
The
rate on the most common mortgage ended the year higher than in 2014,
only the third time the rate has increased year-over-year in the past
decade. The trend of higher rates is expected to continue into next
year, putting pressure on would-be buyers to make a move sooner rather
than later.
The 30-year fixed rate rose to 4.01 percent this week from 3.96 percent last week, according to Freddie Mac’s weekly survey. That’s also up from 3.87 percent in the last week of December 2014.
The rate has ended the year higher only two other
times in the last 10 years. In 2013, it increased to 4.48 percent from
3.35 percent the previous year, and in 2009 it edged up to 5.14 percent
from 5.1 percent. In the other eight years, the rate fell
year-over-year.
The increase comes after the Federal Reserve two
weeks ago upped a key benchmark rate for the first time in almost a
decade. The federal funds rate had been held close to zero since
December 2008. Economists and investors expect the Fed to gradually
increase rates over the next year, with expectations of four hikes of a
quarter point each in 2016.
There are divergent views on how much this will affect mortgage rates. Fannie Mae forecasts the 30-year rate will end 2016 slightly higher at 4.1 percent, while the Mortgage Bankers Association predicts a significantly higher rate of 4.8 percent. Both had expected to close out this year at 3.9 percent.
The difference in those forecasts means a lot of cash
for homebuyers. Someone with a $200,000 mortgage (and 20-percent down
payment) at 4.1 percent would pay $966 per month and $147,903 in
interest over the life of the loan. At 4.8 percent, the monthly payment
increases to $1,049 and the borrower will pay almost $30,000 more in
interest.
That means 2016 is the year to move quickly rather than
sitting on the home-buying sidelines, hoping for an unlikely decline in
mortgage rates.
Average on US 30-year mortgage slips to 3.96 pct. a week after Fed raises short-term rates
FILE - This June 4, 2015, file photo, shows a sign indicating a site has
been sold in a new home development in Nashville, Tenn. One week after
the Federal Reserve raised short-term interest rates from record lows,
the average on a 30-year fixed-rate mortgage went the other way: It
dipped to 3.96 percent from 3.97 percent last week, mortgage giant
Freddie Mac said, Thursday, Dec. 24, 2015. (AP Photo/Mark Humphrey,
File)
Associated Press+ More
By PAUL WISEMAN, AP Economics Writer
WASHINGTON (AP) — What Fed rate hike?
One week after the Federal Reserve raised short-term interest rates
slightly from record lows, the average on a 30-year fixed mortgage went
the other way: It dipped to 3.96 percent from 3.97 percent last week,
mortgage giant Freddie Mac said Thursday.
The drop is a reminder that the Fed has only an indirect effect on
long-term mortgage rates, which more closely track the yield on the
10-year U.S. Treasury. And that yield, in turn, tends to stay down as
long as inflation remains low and investors keep buying Treasurys. The
10-year Treasury yield has declined slightly since the Fed's hike last
week.
"The Fed raising short-term rates by itself doesn't have a very
profound effect on mortgage rates," said Sean Becketti, Freddie Mac's
chief economist.
Back in the mid-2000s, when the Fed raised rates at 17 straight meetings, mortgage rates barely budged, Becketti noted.
Still, the average 30-year mortgage rate is up slightly from 3.83 a
year ago and from 3.76 percent in late October. Becketti said a few
additional modest Fed rate hikes won't likely have much effect on
longer-term rates until the central bank starts reducing the huge
portfolio of bonds it accumulated during and after the Great Recession.
The Fed's bond purchases were intended to lower longer-term loan
rates to try to stimulate borrowing and spending and energize the
economy. The Fed ended its bond purchases last year as the U.S. economy
strengthened. But it has yet to begin selling the bonds, which would
tend to nudge up longer-term rates.
Fed Chair Janet Yellen has signaled that the Fed is in no hurry to
start reducing its portfolio of bonds — one reason long-term mortgage
rates could remain low for a while.
What's more, inflation remains unusually low — well below the Fed's 2
percent target level. In addition, economic weakness and financial
volatility overseas are drawing many global investors to the safety and
relatively higher returns of U.S. Treasurys. This is putting further
downward pressure on longer-term U.S. yields and keeping long-term
mortgage rates low.
John Canally, chief economic strategist at LPL Financial, says
mortgage rates "should not be a major impediment to the housing market"
even if they do rise a bit in 2016. He notes that 30-year fixed-rate
mortgages averaged 6.5 percent during the housing boom of 2000 to 2007.
Historically low mortgage rates have helped the American housing
market recover from the real estate bust of the late 2000s. Despite a
recent decline, sales of existing homes are likely to rise 5 percent
this year from 2014. Year to date, new-home sales have advanced 14.5
percent, driven by job growth that has pushed the unemployment rate to a
seven-year low of 5 percent.
On Thursday, Freddie Mac also reported that the rate on 15-year
fixed-rate mortgages, which are popular with homeowners who are
refinancing their home loans, was unchanged at 3.22 percent.
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
receive the lowest rates.
One point equals 1 percent of the loan amount. The average fee for a 30-year mortgage was unchanged from last week at 0.6 point.
The average rate on five-year adjustable-rate mortgages rose to 3.06
percent, highest since September 2014 and up from 3.03 percent last
week; the fee remained at 0.4 point. The average rate on one-year ARMs
increased to 2.68 percent, highest since September 2013 and up from 2.67
percent last week; the fee held at 0.2 point.
Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Traders at the Chicago Board Options Exchange on Dec. 16, the day the Fed announced a rate increase of .25 percent.Credit
Tannen Maury/European Pressphoto Agency
When expansions end and the economy tips into recession, one or the other is usually to blame.
In
the past, the culprit has frequently been fire — an overheating economy
and rising inflation — that prompted the central bank to push up
interest rates until they ultimately choked off growth. Ice is more
unusual, at least in the United States, but often more painful, as
excess capacity, weak demand and falling prices foster a deflationary
slump that can prove difficult to escape.
As the Federal Reserve
embarks on a new chapter in monetary policy, having raised rates on
Dec. 16 for the first time in nearly a decade, policy makers are acutely
aware of the risks posed by either possibility.
“Raising
rates the first time may have been the easy part; now comes the
challenging part,” said Mike Ryan, chief investment strategist for UBS
Wealth Management Americas.
Fed officials do not have to look far for real-world examples of what can go wrong.
European
central bankers raised rates twice in 2011, killing off a nascent
recovery and plunging the eurozone into a double-dip recession that it
is still struggling to overcome.
Photo
The Chicago Mercantile
Exchange in January 2004, before the Fed began a streak of 0.25
percentage point increases later criticized as too incremental.
But being too slow to tighten the reins of monetary policy can prove perilous, too.
A series of steady quarter-point rate increases by the Fed
between 2004 and 2006 seemed prudent at the time, but in hindsight the
central bank has been blamed for moving too slowly, failing to head off
the economic catastrophe that followed the implosion of the housing
bubble in 2007.
The
biggest problem is that higher interest rates do not bite in
predictable ways. Not only do they take time to percolate through the
real economy, but there is also a difficult-to-foresee threshold at
which the impact can suddenly shift from mild to severe.
“I’m sure there is a tipping point,” Mr. Ryan said. “It’s just hard to know in advance precisely where that is.”
At
least for now, though, few analysts expect the Fed’s initial moves to
bring the nation’s six-and-a-half-year-old expansion to an abrupt end.
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“The
rate hike this month and those next year may not really be felt until
2017,” said Michael Hanson, senior United States economist at Bank of
America Merrill Lynch. “Evidence from past cycles suggests it could take
a year, rather than the next quarter or two.”
The Fed’s task this time is even more complicated because other central banks are leaning in the opposite direction.
With growth in Europe still sputtering, the European Central Bank
has belatedly turned to the tools embraced by the Fed several years
ago, buying up securities and pumping money into the financial system.
But even with some interest rates there in negative territory, Mario
Draghi, president of the E.C.B., is under pressure to loosen monetary
policy further.
In
Asia, the People’s Bank of China is also in easing mode, as officials
try to cushion what looks like an increasingly hard landing for the
economy there, the world’s second-largest. Similarly, Japan’s central
bank is keeping interest rates at rock-bottom levels to encourage
growth.
The
combination of lower rates abroad and rising ones at home is making the
United States dollar surge against other currencies. While that might
be good for American tourists heading overseas, it hurts American
manufacturers seeking export markets and makes imported goods more
competitive, undermining the country’s trade balance.
For
now, most economists say the danger of too little inflation outweighs
the risk of too much: Ice, in effect, may be more of a worry than fire.
“The
risk is skewed toward moving too fast,” said Michael Gapen, chief
United States economist at Barclays. “That’s especially true as the
strong dollar and lower-priced imports keep inflationary pressures at
bay in the United States.”
Although
Mr. Gapen, like most seers on Wall Street, is generally upbeat about
the economy’s prospects next year, some of his colleagues elsewhere are
less sanguine. David Levy, a longtime private economist, is warning
clients that the Fed may be forced to reverse course as weakness in
China and emerging markets redounds to the United States.
The Fed’s rate increase on Wednesday, Mr. Levy cautioned, “may well mark a high point in economic expectations for 2016.”
In
its statement Wednesday about the decision to raise rates, the Fed
itself noted there had been a “shortfall” in terms of actual inflation’s
not measuring up to the central bank’s 2 percent goal, which it
considers helpful in supporting a more robust economy.
Scott
Anderson, chief economist at Bank of the West in San Francisco,
believes the reference to stubbornly low inflation is significant. “This
is new language,” he said. “The doves on monetary policy are saying
they will go along with the rate hike now, but want to see some
acknowledgment that low inflation is still a concern.”
For
his part, Mr. Anderson expects the economy to continue to grow at a
moderate annual pace of about 2.4 percent in 2016. If that forecast for
growth is correct, he predicts the Fed will raise rates three times next
year, lifting the benchmark rate to a range of 1 to 1.25 percent by the
end of 2016.
“Consumers
are cautious but they still have the capacity to spend,” Mr. Anderson
added. “Jobs and incomes are growing, debt levels are low and gas at
about $2 a gallon should help. When people realize the sky isn’t falling
because the Fed is raising rates, they will go back to their usual
spending habits and save the day.”
A
growth rate of about 2 percent would be in line with the steady, but
disappointing, advance that has characterized the current recovery since
it began in mid-2009. By contrast, the economy grew by 3.8 percent in
2004 when the last tightening cycle began, and by 4 percent in 1994 when
an earlier round of rate hikes got underway.
The
comparatively weak recovery, which has left most Americans struggling
to maintain their standard of living, is the principal reason the Fed
has promised to move more slowly during this tightening cycle than in
past ones.
In
the mid-2000s, the Fed raised rates by 0.25 percentage point at every
meeting between June 2004 and June 2006, 17 straight increases that
lifted rates by more than four full percentage points over two years.
The
tightening campaign in the 1990s was even steeper, as rates moved up
three points in one year. Although that wreaked havoc on the stock and
bond markets in 1994, the move may have helped slow growth to a
sustainable pace and set the stage for the 1990s expansion to extend for
a full decade.
Many analysts say that the current expansion could display that kind of longevity.
“Expansions
don’t die of old age,” Mr. Ryan of UBS said, echoing comments by the
Fed chairwoman, Janet L. Yellen, at her news conference on Wednesday.
“They die from exhausted demand, but consumers aren’t exhausted.”
“And
the backdrop of low inflation won’t force the Fed into an aggressive
stance,” he predicted. “This expansion can go on for a while.”
Forecast calls for 200,000-plus increase, continued wage gains
Getty Images
An improved labor market is giving skilled employees more leverage to seek higher pay.
WASHINGTON (MarketWatch) —
The Federal Reserve appears hell bent on raising interest rates for the
first time in a decade and only a lousy U.S. jobs report could put a
freeze on its plans.
Don’t bet on it, though. With job openings
near a record peak and hiring at an 11-month high, employment gains in
November will likely be good enough to allow the Fed to act before year
end.
Economists polled by MarketWatch project a 205,000 increase
in newly hired workers, following a gain of 271,000 in October. That
month’s tally, the biggest of 2015, eased worries after hiring briefly
slowed at the end of the summer.
The
unemployment rate, meanwhile, is forecast to hold steady at 5%. Don’t
be surprised if it dips below that psychological barrier to 4.9%, but
don’t pay it much heed, either.
“Whether it’s 5% or 4.9% doesn’t
tell us anything more,” said Richard Moody, chief economist at Regions
Financial. “ It just tells us we are paring down slack in the labor
market.”
The government will issue the much-anticipated November employment report on Friday morning.
What
could cause the central bank to waffle on rates again? Only a
shockingly poor report, say fewer than 100,000 new jobs. Even then Fed
VIPs would probably have to see warning signs in other surveys of the
U.S. economy.
Evidence of a softening economy is hard to find.
Sure,
energy producers and manufacturers are struggling in the face of cheap
oil and a strong dollar. Yet the huge U.S. service sector — retailers,
restaurants, banks, hospitals and the like — is spitting out plenty of
new jobs. The construction industry continues to expand at a moderate
pace. And even governments are spending a bit more after years of
ultra-tight budgets.
The steady improvement in the U.S. economy
and the well-being of consumers is showing up in paychecks. Average
hourly earnings rose sharply in October to push the increase over the
past 12 months to a six-year high of 2.5%. Overall incomes climbed 0.4%
last month, the latest in a string of solid gains.
The rise in wages matches reports of scattered labor shortages and increasing pressure on companies to boost pay.
That’s
not to say wage growth will accelerate quickly to the annual 3% to 3.5%
levels typical at the height of a recovery. Companies have found a
variety of ways to tame labor costs, for one thing, and they are slower
to hire than they are to post job openings, a sign they will only add to
payrolls if they find a great fit.
Still, the Fed is likely to
view consistent wage growth, even in the 2.5% range, as a call to arms.
Steady income gains are the fuel for strong consumer spending, the
engine of the U.S. economy.
Another cue for the Fed will come
this week from a report on the U.S. service sector compiled by the
Institute for Supply Management. The ISM’s non-manufacturing index has
been hovering near a 10-year high since midsummer and economists predict
a similarly strong reading in November.
The strength shown by
service-oriented companies has more than offset weakness among American
manufacturers, a divide that shows little sign of closing.
”You
are going to see continue to see those industries pulling in separate
directions,” said Gregory Daco, head of U.S. macroeconomics at Oxford
Economics.
No matter. Manufacturing is important to the U.S., but
not nearly as influential as it was a few decades ago. The economy has
enough momentum to keep the Fed on course to raise rates for the first
time since 2006, even if the nation’s growth is still fairly slow by
historical standards.
“The plow-horse economy continues to move
forward, just not by leaps and bounds,” said chief economist Brian
Wesbury of First Trust.
Mortgage Rate Panic: Time to Lock in a Low-Interest Loan?
By
Brian O'Connell
| 11/10/15 - 08:35 AM EST
A highly positive October jobs report,
with 271,000 new jobs created, shows the U.S. economy picking up speed,
and that can mean good or bad news for the residential real estate
market, depending on whether you're a seller or a buyer.
Realtor.com estimates the strong employment report will boost U.S. home
sales activity and will also hike U.S. mortgage rates above 4%.
"We should see continuing strong demand for housing in the months ahead
if today's strong jobs report reflects a true return back to a strong
growth trend we've seen over the last few years," says Jonathan Smoke,
chief economist at Realtor.com. "The healthy strong employment results
for the past two years created an uptick in household formation, which
has driven increased demand for home purchases and rentals."
"The jobs report will influence the long-term bond market, so mortgage
rates will increase in response," he adds. "The average 30-year
conforming mortgage rate
was 3.99% yesterday, having increased nine basis points in one week due
to the consensus view of a strong, but not this strong, employment
report. The 30-year conforming rate will likely top 4% as a result of
this news."
If the Federal Reserve was waiting for proof of an economic rebound, some experts say the latest jobs number fits the bill.
Robert R. Johnson, CEO of The American College of Financial Services,
says the Fed has been looking for strong evidence that the economy is
recovering prior to increasing the fed funds target rate, and the jobs
number should "push up" the date when the Federal Reserve raises
interest rates, likely in December.
"This development is not good news for people looking to take out mortgage debt in the near future," Johnson says. "Once the Fed starts raising rates, interest rates
throughout the economy, including mortgage rates, auto loan rates and
other loan rates will trend upward. I believe that anyone thinking about
refinancing a mortgage or buying a home and taking out an initial
mortgage should not wait, as rates will rise."
Like Smoke,
Johnson also believes the jobs number will boost home sales. "Many
potential homebuyers may see an opportunity to buy a home and take
advantage of current low mortgage rates," he adds.
There is some history on the link between a
stronger jobs climate and higher mortgage rates. "In 2004, when the Fed
increased interest rates for the first time in four years, it caused the
booming real estate
market to get more manic," says John Wake, the so-called geek-in-chief
at Real Estate Decoded and a realtor with HomeSmart in Scottsdale, Ariz.
"Many people expected the increase to be the first of many so they
became even were more desperate to buy a house right away."
Wake says they were right, as the Federal Funds Rate increased from 1%
in the summer of 2004 to 5% in the summer of 2006. "Sure, in the long
run higher rates hurt the demand for homes, but in the short and medium
run they can stoke demand," he says. "It all depends on what people
think an interest rate increase today means for interest rates
tomorrow."
Right now, some real estate insiders say higher
mortgage rates are on the way, with the booming October jobs number
insuring that day comes sooner than people might think.
You can contact Robert Darvish of Platinum Lending Solutions, for any mortgage and refinance needs
Mortgage rates surged this week, according to the latest data released Thursday by Freddie Mac.
Home
loan rates began moving higher after the Federal Reserve signaled last
week that a December interest rate hike was a possibility. What the Fed
does with interest rates doesn’t have a direct relationship to mortgage
rates since they are more closely tied to long-term U.S. Treasury
yields. Bonds are more likely to move ahead of a Fed action than in
response to it.
Still, a lot can happen before the Dec.
16 Fed meeting that could affect home loan rates. Friday’s monthly jobs
report could not only strengthen or lessen the chances of a Fed rate
hike, it also could have an impact on mortgage rates.
The
30-year fixed-rate average jumped to 3.87 percent with an average 0.6
point. (Points are fees paid to a lender equal to 1 percent of the loan
amount.) The 11-basis point rise — a basis point is 0.01 percentage
point – was the biggest one-week spike since June. The 30-year fixed
rate was 3.76 percent a week ago and 4.02 percent a year ago.
The
15-year fixed-rate average climbed to 3.09 percent with an average 0.6
point, rising above the 3 percent mark for the first time in three
weeks. It was 2.98 percent a week ago and 3.21 percent a year ago.
[New rules for lenders seem to be raising costs for mortgage consumers]
Hybrid
adjustable rate mortgages also rose. The five-year ARM average grew to
2.96 percent with an average 0.4 point. It was 2.89 percent a year ago
and 2.97 percent a year ago.
The one-year ARM average increased to 2.62 percent with an average 0.2 point. It was 2.54 percent a week ago.
“Treasury
yields climbed nearly 20 basis points over the past week, capturing the
market movement following last week’s [Federal Open Market Committee]
meeting,” Sean Becketti, Freddie Mac chief economist, said in a
statement.
“Recent commentary suggests interest rates may rise in
the near future. Janet Yellen referred to a December rate hike as a
‘live possibility’ if incoming information supports it. The October jobs
report to be released this Friday will be one crucial factor
influencing the FOMC’s decision.”
[What the new mortgage closing process means for consumers]
Meanwhile, mortgage applications were flat this week, according to the latest data from the Mortgage Bankers Association.
The
market composite index — a measure of total loan application volume –
slipped 0.8 percent from the previous week. The refinance index dropped 1
percent, while the purchase index decreased 1 percent.
The refinance share of mortgage activity accounted for 59.7 percent of all applications.
History shows that if mortgage rates rise, it does not
necessarily mean house prices will drop. Higher rates typically coincide
with strong economies, which means jobs - and thus greater buying power
for home buyers. This photo shows a home for sale in Dana Point earlier
this year. CINDY YAMANAKA, , CINDY YAMANAKA, STAFF PHOTOGRAPHER
As home selling once again takes its seasonal pause, an eerie
pall haunts the real estate community: The specter of higher mortgage
rates.
I’m not sure it’s worth the worry.
I tossed into my trusty spreadsheet a 25-year history of mortgage
rate movements from the St. Louis Fed, local job growth from the
Employment Development Department, and Orange County home price and
sales volume data from CoreLogic.
What I found in the interaction between economic forces and
homebuying habits is that pricier mortgages often coincide with eras of
higher home prices. Since 1990, when mortgage rates have increased over a
one-year period, Orange County’s median selling prices have risen by an
average 8.7 percent in the same timeframe. And the following year, home
prices advanced, on average, by 3.9 percent.
Certainly, that’s not the conventional wisdom. But even in the worst
case scenarios – the 25 months with the largest one-year rate hikes –
housing fared well: Prices averaged 11.1 percent gains that year and 2.3
percent in the 12 months that followed.
Yes, rising rates scare off some shoppers and chill home buying activity – but not in a big way.
Since 1990, when rates are up in a one-year period, Orange County
home sales volume falls 2.2 percent on average in those 12 months, then
declines 5 percent the following year. Sluggish, but by no means a
crash.
And in the worst-case rate hikes, sales slowed modestly on average:
down 5.4 percent during the year in question and another 3.9 percent
over the next 12 months. Not a reason for panic.
So how can the nightmarish scenario for real estate pros – rising
interest rates – actually be relatively benign, and perhaps even good
news, statistically speaking?
Remember the three key words of real estate: Jobs! Jobs! Jobs!
Interest rates commonly rise when the economy is hot – like today’s
business climate, in which jobs are growing at a 3 percent annual pace.
Since 1990, mortgage rates have increased in one-year periods when
local jobs are growing at a 2.1 percent average annual rate – twice the
historical norm. Rising rates do increase house payments, however, so a
house hunter needs plenty of confidence in the job market to make a leap
into home buying mode.
Look what job growth means for housing. Since 1990, in any year when
Orange County bosses are in hiring mode – that is, they generate
year-over-year job growth – home prices have averaged 8.3 percent gains
and similar size increases the following year. Sales activity is
basically flat in the same two years – pretty remarkable stability amid a
significant jump in pricing.
Then look at boom times. In the 25 months with the largest
year-over-year job gains since 1990, Orange County’s average price gain
is roughly equal to what was seen in all of those hiring years. But that
faster-paced job growth means an average jump of 15.2 percent in
homebuying activity the first year and 6.8 percent in the 12 months that
follow.
Yes, these results are a bit counter-intuitive. And to be fair,
history isn’t a perfect guide to the future. For example, home prices
rose only 70 percent of the time in a year when mortgage rates moved
higher – so industry fears of potential trouble aren’t totally
unjustified.
Still, what should really be spooking the local housing market late
in 2015? Any risk of a significant slowdown in Orange County’s
biggest-since-the-’90s hiring spree.
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) 
FILE - This June 4, 2015, file photo, shows a sign indicating a site has
been sold in a new home development in Nashville, Tenn. One week after
the Federal Reserve raised short-term interest rates from record lows,
the average on a 30-year fixed-rate mortgage went the other way: It
dipped to 3.96 percent from 3.97 percent last week, mortgage giant
Freddie Mac said, Thursday, Dec. 24, 2015. (AP Photo/Mark Humphrey,
File) 
Getty Images
