Bobby Darvish: Unexpected drop in mortgage rates offers buyers great opportunities

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.

When interest rates go negative

When interest rates go negative

Spencer Platt/Getty Images

February 21, 2016

The smartest insight and analysis, from all perspectives, rounded up from around the web:

Imagine this: "Once upon a time, people actually got paid to lend money,"said Matt O'Brien at The 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 Irwin at The 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 Crook at Bloomberg​ 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 Tett at Financial 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 fall amid uncertainty in global markets

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.

[Home buyers don’t seem to be using new tools to shop for mortgages]

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.

[Mortgage applications may benefit from changes in credit-scoring system] 

 

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.

Average long-term US mortgage rates fell for the fifth straight week

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

Where are mortgage rates heading? Not necessarily up

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.

(Photo: Creatas, Getty Images/Creatas RF)

Story Highlights

• Next Fed policy committee meeting is March 15-March 16. But some say rates won't go up then either.
• Mortgage rates expected to be in the low 4% range for next few months.
• Worries about China and global economy pushing down long term rates.

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.

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Underwater on your mortgage? This program could help

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.

DETROIT FREE PRESS

Mortgage rates not likely to skyrocket after rate hike

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