Mortgage rates hit lows not seen in three years

0-year mortgage rates hit 3-year low

April 14, 2016

Updated 11:30 a.m.

REGISTER GRAPHIC

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

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

3

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

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

Bobby Darvish - Mortgage rates wander upward for third week in a row

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.

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

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.”

[Mortgage applicants may benefit from changes in credit scoring system]

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.

Bobby Darvish of 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.

DETROIT FREE PRESS

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

Mortgage rates defy prediction: Is now a good time to buy a home?

By Gail Marksjarvis Chicago Tribune

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.

Lock in now! Stock sell-off sinks mortgage rates

You may be losing your shirt in the stock market this week, but you could get a leg up on your home loan. As investors flee stocks, they are heading to bonds, and as a result, mortgage interest rates are falling. Mortgage rates ended 2015 at their highest level in nearly six months, but have since dropped precipitously.
"Bond markets continue defying the odds so far in 2016," wrote Matthew Graham, chief operating officer of Mortgage News Daily.

Olena Timashova | Getty Images

When stocks sell off, investors historically head to the bond market because it is considered a safer investment. Higher demand means lower yields. Lenders price according to the yields on mortgage-backed bonds, which generally follow the 10-year Treasury.

Mortgage rates do not follow the Federal Reserve funds rate, but most expected that as the Fed raised rates, mortgage rates would rise as well. This has more to do with an improving economy, which would be behind both.

"Given the Fed rate hike and strong ADP data yesterday — among other reasonably decent economic anecdotes — we would be more justified in expecting bonds to be under pressure at the start of the year," added Graham, calling the drop in rates, "a pleasant surprise."


The average rate on the popular 30-year fixed mortgage is now just below 4 percent for the most credit-worthy borrowers. Applications to refinance a loan had dropped dramatically in the last two weeks of 2015 amid higher interest rates, but this move lower could create a new opportunity for thousands of borrowers who have yet to refinance at a lower rate.
There are not many regular borrowers who would benefit from the current rates, given the refinance boom of the last three years, when rates were hovering around record lows. There are, however, nearly 430,000 borrowers who could still benefit from the government's HARP refinance program, according to the Federal Housing Finance Agency. This is for borrowers who still owe more on their mortgages than their homes are worth, commonly known as "underwater." Their loans must be government-backed. Why so many still?
"They may be in a good financial position, able to make their monthly payments and don't want to mess with it," said Andrew Wilson, Fannie Mae's chief spokesman. "There are always some number of people that just never do, and the question is why not?"

Home mortgage lenders easing up on home loans

These borrowers are leaving money on the table. They could also refinance into shorter term loans, paying off principal more quickly. Even if rates don't move much lower, refinancers could benefit from a slow easing in the credit markets.

"That would open refinancing up to homeowners shut out of the mortgage market over the past few years because of their credit scores, debt-to-income ratios, income, assets or lack of equity," said Guy Cecala, CEO and publisher of Inside Mortgage Finance. "An improving economy and rising home prices could open up re-fi's to borrowers with higher rate mortgages who have been forced to the sidelines for several years."

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.

Related: The Fed Just Raised Rates. Here’s What It Means for Your Money

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.

The Federal Reserve Shouldn't Raise Interest Rates, It Should Reverse Quantitative Easing Instead

I’ve already mentioned this in passing today but it’s worth laying out why I think that raising interest rates would be the wrong decision this week. Instead, the Federal Reserve should be reversing quantitative easing. Do note that this would have very much the same effect so I’ve already agreed that monetary tightening should be taking place. It’s how that is done, the technique, that I am concerned about, not the specific policy aim itself.
It’s also rather too late for anyone to adopt my preferred policy because everyone is being geared up for the rate rise already and the expectation of it already built into market prices. But it is still, I think, a better policy for one single reason: granularity.

So let’s walk back to what the whole thing has been about. We wanted to have looser monetary conditions–that meant lowering interest rates. Once we’d got to near zero there wasn’t much lower we could go (it’s possible to have slightly negative rates, but not very negative rates) and thus quantitative easing. That is the Fed creating money to purchase low risk assets and thus raise their price and lower their yield. This pushes investors out into higher risk assets as they search for that elusive yield. That, in turn, lowers long-term interest rates which is what we wanted to achieve.
Note that this isn’t any different in principle from the normal open market operations the Fed uses to try and fine tune interest rates. Indeed, we could call QE simply the Mother of All Open Market Operations (not that MAOMO is all that impressive an acronym). And just as with those open market operations QE should and will work both ways. Reduce the assets held by the Fed and this will reduce the price of those assets being held and thus increase their holdings. That again will bring people in along the risk curve and so raise long-term interest rates.
As, also, raising interest rates directly will raise interest rates. So why prefer one method over the other?

Granularity: How fine-grained can you make the policy be? An interest rate rise is an all or nothing thing. Either you raise rates by 0.25% (and no one thinks it’s going to be in any units smaller than that) or you don’t. But we already know how the Fed intends to reverse QE in the long term.
Those bonds it currently holds mature over time. Indeed, some of them are maturing right now, as they have been in dribs and drabs for some years. Currently, as bonds mature the Fed goes out into the market and purchases more in order to maintain their stock. All they have to do to reverse QE is stop buying more as bonds mature. That means the borrowers, in order to roll over their debt, have to issue new bonds to the market. The Fed’s holdings reduce, the market’s increase and that’s a reversal of QE. And it also raises long-term interest rates in exactly the manner that the original purchases lowered them. Which brings us to that granularity.

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The Fed can do this in any volume it chooses. It could simply not replace $100 million’s worth each month. Or a billion’s, or $50 billion. It’s entirely at liberty to do as much or as little tightening as it wants. It thus has much more control over what happens to the markets than that all or nothing raise rates or don’t. And yes, by the way, they do indeed know how much replacement or not replacement of those maturing bonds would raise rates. Precisely because this is just a larger version of those open market operations they’ve been doing for near a century now.
It’s much too late for the Fed to change their minds and do this of course, but I do still feel that it would be a better way of managing things.

Mortgage rates fall for the third week in a row

freddie

Win McNamee/Getty Images

Mortgage rates wandered down for the third week in a row, according to the latest data released Thursday by Freddie Mac.

The 30-year fixed-rate average slipped to 3.93 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.95 percent a week ago and 3.89 percent a year ago. After gaining 22 basis points — a basis point is 0.01 percentage point — in two weeks in early November, the 30-year fixed-rate average has steadily declined the past three weeks but has given back only five basis points.

The 15-year fixed-rate average ticked down to 3.16 percent with an average 0.5 point. It was 3.18 percent a week ago and 3.1 percent a year ago.

[New rules for lenders seem to be raising costs for mortgage consumers]

Hybrid adjustable rate mortgages were mixed. The five-year ARM average dropped to 2.99 percent this week with an average 0.5 point. It was 3.01 percent a week ago and 2.94 percent a year ago. The five-year ARM average has stayed below the 3 percent mark for 22 of the past 24 weeks.

The one-year ARM average rose to 2.61 percent with an average 0.3 point. It was 2.59 percent a week ago.

“Treasury yields ticked down 3 basis points after weak manufacturing data,” Sean Becketti, Freddie Mac chief economist, said in a statement.

“After the survey [of mortgage lenders by Freddie Mac] closed, [Federal Reserve Chair Janet] Yellen implied that the economy is ready for a rate hike in December. However, all eyes remain on this Friday’s jobs report, the last significant release prior to the [Federal Open Market Committee’s] meeting.”

[New disclosure rules for mortgages prove to be a headache, but not for all]

Meanwhile, mortgage applications were flat, according to the latest data from the Mortgage Bankers Association.

The market composite index — a measure of total loan application volume – slipped 0.2 percent from the previous week. The refinance index dropped 6 percent, while the purchase index rose 8 percent.

The refinance share of mortgage activity accounted for 56.6 percent of all applications.

November jobs report likely to give Fed go-ahead to raise interest rates

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.

30-year mortgage rate dips slightly

The Associated Press 10:56 a.m. EST November 20, 2015

WASHINGTON - Average long-term U.S. mortgage rates edged slightly lower this week after two straight weeks of sharp increases. Expectations persist that the Federal Reserve may soon raise its key short-term interest rate.
Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage slipped to 3.97 percent from 3.98 percent a week earlier. The key 30-year rate was close to its level of a year ago, 3.99 percent.
The rate on 15-year fixed-rate mortgages declined to 3.18 percent from 3.20 percent.
While it kept the key rate at a record low near zero, the Fed recently signaled the possibility that a rate hike could come at its next meeting in December. Fed officials believed last month that the economic conditions needed to trigger the first interest rate hike in nearly a decade could “well be met” by that time, minutes of their October discussions released Wednesday showed.
The yield on the 10-year Treasury bond, which mortgage rates have been tracking, dropped to 2.27 percent Wednesday from 2.34 percent a week earlier. The decline followed recent weeks of soaring yields on U.S. government bonds, which move in the opposite direction of the bonds’ prices. The yield was at 2.24 percent Thursday morning.
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 from last week at 0.6 point. The fee for a 15-year loan declined to 0.5 point from 0.6 point.
The average rate on five-year adjustable-rate mortgages dipped to 2.98 percent from 3.03 percent; the fee rose to 0.5 point from 0.4 point. The average rate on one-year ARMs edged down to 2.64 percent from 2.65 percent; the fee increased to 0.3 point from 0.2 point.

Mortgage rates surge in anticipation of Federal Reserve rate hike

 

(Andrew Harrer/Bloomberg)

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.

[Fed less worried about risks from China’s slowdown]

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.

Why pricier mortgages shouldn't spook housing

Oct. 25, 2015

Updated 8:00 a.m.

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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.

Average rate on 30-year mortgage rises to 3.82%

A realty sign last year in front of a home for sale in Carlsbad.
(Lenny Ignelzi / AP)

WASHINGTON — Average long-term U.S. mortgage rates rose slightly this week yet remained below 4% for a 12th straight week.
Mortgage financing giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage increased to 3.82% from 3.76% a week earlier. The rate on 15-year fixed-rate mortgages rose to 3.03% from 2.99%.
Despite the increase, rates remained well below last year's levels, providing an inducement for potential homebuyers.
A year ago, the average 30-year mortgage rate was 3.97%, while the rate for 15-year loans was 3.18%.

In recent days, two influential members of the Federal Reserve's policymaking body spoke in favor of postponing an increase in its key short-term interest rate. The Fed has been expected to raise the benchmark rate later this year for the first time in nearly 10 years.
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% of the loan amount.
The average fee for a 30-year mortgage held steady from last week at 0.6 point. The fee for a 15-year loan also remained at 0.6 point.
The average rate on five-year adjustable-rate mortgages was unchanged at 2.88%; the fee remained at 0.4 point. The average rate on one-year ARMs declined to 2.54% from 2.55%; the fee was steady at 0.2 point.

7 ways you can cash in on historically low mortgage rates

ways you can cash in on historically low mortgage rates

Oct. 4, 2015

Updated 9:24 a.m.

By JONATHAN LANSNER / STAFF COLUMNIST

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How rising interest rates cut borrowing power

This example assumes a borrower has annual household income of $80,000 and puts one-third of it into a house payment.
• At 3.5 percent you can borrow $494,383
• At 4 percent you can borrow $465,004
• At 4.5 percent you can borrow $438,142
• At 5 percent you can borrow $413,545
• At 5.5 percent you can borrow $390,990
• At 6 percent you can borrow $370,277
Source: The Register

Graphics

Everybody is trying to guess what rising interest rates will mean for the housing market, but not enough people are focusing on what they can do about it before it happens.
Yes, we’ve been warned before that a rate hike is coming, and it still has not happened. But this time it feels like a reasonable certainty that we’ve seen the lowest mortgage rates in this cycle – and it was record cheap money.
No matter the timing of any serious rate increases in the future, today’s mortgage rates are what anybody before this century would have called an absolute steal. Fixed 30-year mortgages run in the 4 percent ballpark today. That’s up about a half-point from 2012’s absolute lows, but it’s still a bargain vs. the average rate of 5.5 percent since 2000 and the 10 percent average seen in the last 30 years of the 20th century.
And the opportunity is not simply in low rates.
I’m not sure many people know that lenders are far more generous today with both loan terms and approval standards than they were immediately following the Great Recession that wrecked their mortgage portfolios.
There are good reasons behind bankers’ renewed optimism: Home values have firmed, as have the paychecks that allow homeowners to pay back their loans.
Certainly, many households are satisfied with their housing and mortgage situations. But let me suggest some ideas to consider as 2015 winds down, because I have a hunch that years from now many folks will look back to today and say, “Gosh, I wish I could have borrowed more at those great rates.”
SIMPLE REFI
Have you checked rates lately? Do you even remember what rate you’ve got?
Forget all the hassles of borrowing a few years back, right after the recession ended. Lenders today have almost made the experience pleasant. I said almost!
And there are deals. Despite all the talk about rising interest rates, mortgage rates have quietly slipped back to around 4 percent as questions emerge about the economy’s durability and the Federal Reserve delays hiking rates.
Perhaps home values are up significantly in your neighborhood. Maybe there’s been a major improvement in your employment picture, paycheck or credit score. Be aware that the mortgage rate you could get these days might surprise you.
And if you think you’re living in a home where you will be for a long time, is this the time to pay extra points or loan fees to get an even cheaper rate with a refi and save even more money?
GO FIXED
Adjustable-rate mortgages became the scourge of the real estate business after the housing debacle, because too many aggressive borrowers, with the help of too many aggressive lenders, used these deals to buy or keep housing they couldn’t afford.
The resulting pushback from bankers and borrowers alike reduced the popularity of adjustable loans. Variable-rate deals funded 1 in 9 of all Orange County home purchases in the past seven years, after being used by half of all homebuyers in the previous seven years, according to CoreLogic statistics.
I suggest that homeowners with adjustable rate mortgages consider switching to a fixed rate.
Yes, the most popular adjustable rate mortgages do offer extended periods of locked-in starter rates, from five to 10 years. That’s plenty of delay before any future payment shock.
But why risk it ? It’s a good bet that today’s low interest rates on fixed rate loans are not much higher than what many borrowers are paying on their adjustable loans now.
So wouldn’t you feel foolish some years down the road if you hadn’t locked in today’s rates if your adjustable repriced higher? That’s one reason I refinanced this year.
EXTEND LOAN LENGTH
Many homeowners used the cheap money environment to pick up mortgages of shorter duration than the traditional 30 years to get even lower interest rates.
There’s only one problem with these shorter-maturity deals: Monthly payments are high, and much of the money is used to pay down principal, so tax deductions for mortgage expenses are reduced.
It’s not a small amount. The monthly payment on a 3 percent, $400,000 15-year mortgage is $2,762. That same-size loan, at today’s 4 percent rate for 30 years, costs $1,910 a month. That’s an immediate $852 advantage to going long.
Yes, a longer-term mortgage does have higher long-run interest cost. However, think how that improved household cash flow can be used in various ways to pay down other debts, invest in other goals – education or retirement – or keep a financial cushion for emergency purposes. (Yes, there will be another downturn.)
P.S.: If you’ll simply blow the fresh savings on luxury or frivolous goods, skip this idea.
BUY
First-time shopper? Moving up? Downsizing?
If you believe today’s mortgage rates are the last shot at a once-in-a-generation deal, it may be time to think about making that purchase.
Guessing which direction home prices will go is never a feasible way to time a home purchase. For every person who swears they saw the previous housing bust coming, how many saw the bottom and buying opportunity of 2012, too?
I know some homebuying holdouts are convinced that home prices are too high and will only go lower. I won’t debate the outlook, I’ll just ask: How long do you think it would take for serious discounts to appear?
Cheap interest rates could be history by the time any significant price drop materializes. That could mean a higher monthly payment, despite getting a deal on the selling price.
Ponder this: If mortgage rates jump a full percentage point in the next year, home prices will have to fall by at least 10 percent to offset the impact on monthly house payments.
CASH OUT
I know a lot of homeowners and financial consultants think taking equity out of the home is generally a bad idea.
Let me argue otherwise.
Assuming that you’re the type of financially savvy homeowner who won’t spend every last penny in your bank account, here is a sad truth about personal finances: No banker will lend when you really need money (say, if you’re out of work).
Today, assuming you’re gainfully employed with a solid credit history, lender generosity includes doing cash-out deals again.
I’ll assume you’d use the proceeds of a cash-out loan for a noble cause: paying off other debts, investing in other long-term needs or creating a hefty rainy day fund.
And for those approaching retirement with plenty of home equity, please just ask yourself where emergency funds will come from when the paychecks stop. Sadly, it’s easier to access home equity when employed, than not – unless you sell your home.
LINES OF CREDIT
If you just want the mental comfort of using your home as a financial backstop in a tough situation, getting a home equity line of credit today is an option.
Many lenders are offering these loans at little or no cost, with only a modest annual maintenance fee. You won’t incur any sizable extra house payments unless you access the line.
One downside is that these loans have a shorter lifespan than traditional mortgages – often just 10 years to use it and another 10 to pay it back.
And if you obtained a credit line a few years ago, it may be worth looking into getting a new one. Terms have improved. Or you can simply extend the life of your existing credit line.
INVEST
Let’s say you’re really bullish on real estate: Today’s cheap money can make a property investment pencil out profitably.
With a few significant caveats:
One, bankers still are cautious about loans for nonowner-occupied housing. So be prepared to bring a significant down payment to the deal and solid household financials – and be ready to answer plenty of questions.
Two, cheap money helped push up home values. That makes many investment deals not as profitable as hoped. Be realistic about any investment potential.
Three, be prepared for bidding battles. Numerous investors are making all-cash bids for investment-type properties.
Nobody said this would be easy.

Real Estate 8/09/2015 @ 10:57AM 1,529 views

What The Employment Report Can Do To Your Home Buying Plans

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No other economic report gets more attention, is more closely watched, analyzed, dismissed, cited as a barometer or has a bigger impact on mortgage interest rates than the Employment Report. I have been in front of a TV at 8:30 in the morning on the first Friday of almost every month for the past 25 years, waiting with great anticipation to see what that number will look like.  This is immediately followed of course with fretting and wondering about how the financial markets will respond and what will happen to interest rates that day.
The mighty jobs report can have an immediate and significant impact on your monthly mortgage payment. Generally speaking; good economic news tends to be bad interest rate news and vice versa.
A strong Employment Report with lots of jobs created, a real increase in hourly wages and a low unemployment rate without a labor force participation asterisk, is often the start of a tough day for interest rates. The financial markets tend to take robust jobs numbers and bolster economic forecasts, reckoning that growth will surely follow and it is now safe to chase riskier equity market assets for bigger returns.

Meanwhile, the safe haven credit markets drain from the flight-to-risky runoff and suddenly there are more Mortgage Backed Securities (MBS) than there are interested buyers. MBS prices move lower and yields move higher. Higher yields mean higher mortgage rates, higher mortgage rates mean higher monthly mortgage payments, higher monthly mortgage payments may alter a well-constructed home buyer decision tree. Every house on the market just got more expensive.

The Best And Worst Cities To Buy A Home Rather Than Rent

Financial markets prognosticators argue that economic forecasts are already “priced-in” to the markets well ahead of the actual report. That would mean of course that the jobs report release would have virtually no impact on trading activities, as long as the results are in line with the forecast.  This past Friday we saw numbers that were near forecasts and interest rates weathered the day virtually unchanged.
Once in a while the actual numbers reported are significantly weaker or stronger than expected and the financial markets can respond dramatically.  An unexpectedly weak jobs report has been known to trigger a rally in the credit markets and drive rates lower, while upward pressure on rates can result from unexpected strength.
Time was, the unemployment rate alone could be market moving, but now all of the economic data contained in the report is digested and assimilated into market force movements. Right now all eyes are on the Fed waiting to see when they will pull the trigger on that long awaited, hyper-analyzed short term rate hike.  Bets are placed on which economic release will be the last piece of the tipping point puzzle and the big daddy is the Employment Report. After seeing the results from this past Friday, the smart people seem to think that September will not be when the Fed’s generously accommodative monetary policy ends.

After 25 years of objective observation, I submit that the headline unemployment rate no longer has the muscle it once had.  It is and always has been just a telephone survey of selected households, until it was coopted as a political football on the eve of the 2012 elections. Now it has become more of a political tactic than an economic indicator and has lost the stand alone market moving credibility it once had.
The financial talking heads tend to gloss over the underemployed, the jobless claims and the newly-retired-because-no-jobs-exist, and talk about how great things are because the unemployment rate is 5.3% today. But ask the downsized class how they are doing after losing long-term employment in their mid-to-late fifties; find out what their prospects are like, show them that blockbuster 5.3% unemployment rate and see what they have to say.
And for now, get used to that higher monthly mortgage payment.

Dollar rises as Fed keeps interest rates on hold

Author Adam Carter Published August 2, 2015 Comments 0

It is imperative to state that the unemployment rate has reached a seven year low of 5.3 percent which is being seen as a huge positive.

“They haven’t made up their minds, but… we’re getting that much closer to satisfying their criteria” for a rate hike, Hanson said.
But Baumohl says not to bet the farm that we’ll see any rate hike at the next meeting, because so many people have been anticipating an increase for the past year.
Although the September meeting, when Yellen is set to hold a news conference, is seen as the most likely time for a rate increase, some analysts think the Fed might wait until December.
“

The addition of a single word “some” in the sentence below is the strongest indication we are indeed creeping closer to a rate hike”,

Alan Ruskin, global head of Group of 10 foreign exchange at Deutsche Bank AG, said in an e-mail.
In determining how long to maintain this target range, the Committee will assess progress-both realized and expected toward its objectives of maximum employment and 2 percent inflation.
Gold fell more than 1 percent to near its weakest level since early 2010 on Thursday, as the dollar jumped ahead of US economic data that is likely to strengthen expectations for an interest rate hike by the Federal Reserve in September. Though the rate-setting committee has not raised rates, as expected by the markets, it, nevertheless, dropped some hints that the rate hike is not far away.
Chris Williamson, chief economist at Markit, said: “The improving job market, alongside the boon to households from low inflation and falling oil prices, has been key to the economy’s ability to sustain strong growth”. He believes a rate hike is still possible in September, but he said the odds are not as good following Wednesday’s statement. Treasury prices were largely unchanged after the Fed statement. U.S. The Fed still expects inflation to rise gradually toward its 2 percent target. The first-quarter figure was revised to a gain of 0.6 percent from a previously reported contraction.
At the same time, inflation has lingered below the Fed’s goal for three years, with the central bank’s preferred gauge rising just 0.2 percent in May from a year earlier.
Brent settled down 7 cents, or 0.1 percent, at $53.31 a barrel, while U.S. crude closed lower by 27 cents, or 0.6 percent, at $48.52. So they do not expect the monthly payroll numbers to shock on the downside.
“Economic activity has been expanding moderately in recent months”, it said in a statement.
“The most important thing the Fed is trying to communicate is not the timing of the first liftoff, but the pace, and continuing to try to counsel the markets about the pace being gradual”, said Roger Bayston, senior vice president and director of fixed income at the Franklin Templeton fixed-income group in San Mateo, California.

The Calamity Of Your Mortgage Interest Rate Edging Higher

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Mortgage interest rates trade every day, they go up, they go down, sometimes they only move sideways but they change.  It is the way it is and it is the way it will be, so understanding how that impacts your personal mortgage repayment future, will help you digest whatever the financial markets throw at you.
Some perspective from my side of the equation; even though mortgage rates are no longer at the historical bottom they were at just a short while ago, they are still historically low.  In fact, as recently as the dawn of the new millennium, mortgage rates were hovering around 8% and sub-5% rates have only been around for less than a decade.  Absent any high interest rate frame of reference, a .25% increase might seem titanic to some, when in fact , historically speaking, maybe not so much.
First, some knowledge; a .25% increase in the interest rate for your $300,000, 30-year mortgage will cost you an additional $43.57/month. So if you could have locked in your interest rate at 4.00%, but you were hoping rates would go down and you waited, $43.57/month was the gamble. Calamitous maybe, but that is a function of the beholder’s perspective.
Mortgage consumers who remember high single digit interest rates in the 1990s and even some who can remember double digit interest rates as high as the teens back in the late 1980s, have a working frame of reference to temper the effects of interest rate movements. First time home buyers who have only ever known the historically low interest rate environment that has become our norm, do not.

And while some financially astute market participants may be able to predict interest rate movements with well researched forecast models that get it right sometimes, mortgage consumers use less sophisticated tools for divining when to lock in an interest rate. The consumer tool most used is hope, and this strategy too often delivers mixed results. Most borrowers I work with hesitate to lock in their rate because they are hoping rates will go down and they want that lower hoped for rate.

Saving $43.57/month when rates move lower is a welcome victory when it happens, but most consumers focus only on the rate and not the monthly dollars and sense.  The rate is the subject of the conversation, not the impact on monthly payments.  For many consumers, it is the up or down movement of the interest rate that will mean success or failure on the mortgage financing scorecard.

Global economic and political interdependence means that an unexpected, no-way-it-could-have-been-anticipated event on the other side of the planet can have a direct impact on how interest rates trade tomorrow.  Sudden troop movements at the border of a country with a hard to pronounce name, or the possibility of a small country defaulting on financial obligations due (Greece for instance), can cause the financial markets to move dramatically and instantaneously.  And then later in that same day, when talk of resolution appears to be diffusing the need for troops or a bailout seems imminent, the financial markets reverse and all the while your mortgage rate zigs and zags.
I watch interest rates almost obsessively, as a boots-on-the-ground mortgage loan originator; it is an integral part of the job. I watch and absorb economic reports as they are released throughout the month and I see how the credit markets process this information.  Sometimes it makes sense, sometimes it does not, and after 25 years of this, I am certain of one thing; interest rates change. Lock in early and get on with the business of your mortgage approval.