Mortgage rates improved again today, bringing them to their best levels of month, just on par with rate sheets from late August. Conforming, 30yr Fixed rates held at 4.500% in some cases with the improvement being more readily seen in the form of lower closing costs. In others, the the most efficient combination of upfront cost and monthly payment (best-execution) fell to 4.375%.
The Federal Reserve is very much in focus for several reasons. Of course the upcoming meeting and announcement on Wednesday have been in focus for several months as they've increasingly become the most likely venue for the Fed to signal a reduction in asset purchases (aka "tapering"). Wednesday remains important for that reason, but also because the text of the announcement, the press conference with the Chairman and the staff economic projections will help build the market's sense of how the Fed will handle itself as the tapering process (assuming it's announced) continues to unfold.
These things are important to mortgage rates because the nature of Fed policy with respect to those asset purchases has a direct effect on the mortgage-backed-securities (MBS) that underpin the world of mortgage rates not to mention the general effect on economic and market momentum. In other words, sentiment surrounding Fed policy can move "bond markets" in general and specific decisions regarding MBS purchases can have an additional positive or negative effect on Mortgage Rates specifically.
Even outside the realm of policy adjustments, the Fed is a market moving consideration. Today, for instance, the fact that Larry Summers withdrew from consideration as the next Fed Chair gave both sides of the market (stocks and bonds) a boost. This happened because Summers was seen as more likely to dial back the accommodation whereas the remaining frontrunner Janet Yellen is seen more like Bernanke. Fears of decreased accommodation under Summers have perhaps been a slight drag on prices of Stocks and Bonds. When bond prices fall, rates rise.
- Massachusetts Mortgage rates moved slightly lower this afternoon after beginning the day in line with yesterday's worst levels of the year. Things looked relatively bleak as domestic market participants were greeted with flat trading levels vs Wednesday's late day weakness and stronger economic data in the morning that, at first, threatened to take rates even higher. But bond markets, including MBS (the mortgage-backed-securities that most directly affect mortgage rates) were able to hold their ground long enough to make it to the 1pm 30yr Treasury Auction, which helped rates move lower into the afternoon. Best-Execution for 30yr Fixed, Conventional loans remains at 3.625%, with ongoing stratification between lenders due to recent volatility.
Mortgage rates began the day much improved
compared to Monday's latest offerings, but the gains mostly evaporated by the end of the session. The mortgage-backed-securities (MBS) that most directly affect rates, had been steadily improving since sustaining major damage from Friday through Monday morning. Those improvements carried through to this morning's rate sheet print times, but trading levels began to deteriorate shortly thereafter. Stock prices and Treasury yields rose. MBS fell (falling prices mean rising rates), and throughout the course of the day, most lenders recalled rate sheets for negative reprices. The result is a 30yr Fixed Best-Execution level that remains at 3.625% with a few lenders still marginally lower in costs vs yesterday.
There are only 10 calendar days remaining in the Fed's MBS Purchase Program, as it is scheduled to end on March 31st. What does this mean for interest rates?
The program was implemented in January 2009 to help add some liquidity to the secondary lending market. The goal of the program was to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. At the time, mortgage lending was risky and investers were hesitant to buy mortgage backed securities (MBS) and hold them in their portfolios. The Fed stepped in and agreed to buy/back $1.250 trillion of MBS, under the supervision of the FOMC. As a result, the secondary market received a much needed boost from the Fed and the refi-boom was again in full force as interest rates hit historical lows.
What happens now? Well, many investors and analysts are predicting that interest rates will start to trend upwards after the 31st, as anxiety will hit the marketplace. Interest rates are not expected to sky rocket, but some analyst have forecasted rates to hit 5.500% by early May 2010.
In the meantime, 30YR fixed interest rates remian at 4.875% to start the week of March 22, 2010. We at HomeQuest urge anyone seeking home financing needs to act now, while the interest rates remain at historical lows.
Mortgage bond prices rose nicely on Thursday, pushing mortgage backed security yields to their lowest levels in nearly three weeks following soft economic data. As a result, 30YR Fixed interest rates remain at 4.875% to end the week. While Labor Department officials surmised that the rise in jobless claims was a result of delayed reporting from the prior week, the claims have definitely drifted higher following what now appears to have been an overstated plunge in December/January. This morning, bond prices are mixed and have shown little reaction to the second report of Q4 GDP. Growth was revised higher, to 5.9% from 5.7% for the quarter, but personal consumption was revised lower, to 1.7% from 2.0%. Later today, we will receive the U of M's final February consumer confidence index as well as January's existing home sales data. With existing home sales now representing about 90% of all sales, it's about the only housing data (other than valuations) that matters.
Mortgage rates in Massachusetts remianed quite steady to start the week, despite a recent rally in the equities market. The Obama Administration recently released their 2011 Budget/Forecast, providing analyst with a plethora of data to scrutinize. What does this mean for mortgage rates? Well, the budget calls for $1.6 trillion in deficit spending next year, thus placing a strain on Treasury auctions needed to eventually pay-off the debt, thus placing a burden on the yields (%) for mortgage backed securities. Should yields on mortgage backed securities (MBS) rise, a rise on interest rates will surely follow to offset the MBS yield pay-outs to investors. Furthermore, should the Federal Reserve continue its' plan to cease purchasing mortgage backed securities at the end of March 2010, mortgage rates will most certainly rise from the historic levels we've been celebrating for the past 12 months. This is one major reason HomeQuest Mortgage professionals are urging consumers to act now and avoid missing the opportunities in today's marketplace.
The Pending Home Sales report will hit the news wires today to provide us with some insight to the recent trends in the housing market. The National Association of Realtors releases the report, which shows the monthly change in the amount of existing homes (excluding new construction) in which a purchase & sale contract has been signed, however pending a closing date. Pending Home Sales is a leading indicator of the housing activity and economic momentum, as it provides supplemental evidence of consumer confidence. In addition, home purchases stimulate the economy in other retail merchandising, as there are many other housing fixtures needed to complete the furnishing of the home. The data in this report has a two month lag time, so today's data is for the prior month of December 09.
Massachusetts mortgage rates closed the month of November at a near 52 week low, causing new loan originations at many brokerage firms to soar. Many homeowners decided to take advantage of the opportunity and were able to lock-in at historically low interest rates. On November 27th, mortgage backed securities (MBS: FNMA 30YR 4.50%) traded at their highest price since January 7, 2009, driving 30 Year Fixed rates down to 4.625%. The national 30 year fixed rate mortgage averaged 4.71% for the week ending Dec. 3rd...the lowest average since Freddie Mac began its weekly survey in 1971. To benchmark, Massachusetts mortgage rates are down from 4.78% last week and 5.53% a year ago. Those tracking rates may recall mortgage rates around 6.00% this past summer.
In general, bond prices and bond yields share an inverse relationship...when mortgage backed securities are in high demand, MBS prices increase and yields decline. When bond yields decline, mortgage rates typically decrease. Bonds are a safe-haven for financial investors looking for an alternative to the risky equity markets. Last week, Fed Chairman Ben Bernanke announced that the recovery would not be an easy one, inflation will remain low and that rates will remain low for an extended period of time. As a result, the mortgage backed securities experienced a substantial sell-off, causing prices to drop and mortgage rates to increase .125-.250% by week ending Friday December 4th.
In summary, I encourage anyone pondering the thought of refinancing to act now and take advantage of the all-time low rates...don't attempt to time the market! Many homeowners are hesitant to pull the trigger in hopes of obtaining a lower rate and end up missing the opportunity. Often times, the media/publications can confuse borrowers. Rate shoppers become frustrated when they call their mortgage broker inquiring about current rates to find out the rates are different then what they're reading online or in the newspaper. It's important that shoppers understand mortgage backed securities are indeed "securities" that trade in "real time" and are subject to change hourly due to market volatility. Many online advertising websites are updated 3-4 times daily, however it is too cumbersome a project to modify websites an a minute-by-minute basis. Newspaper rates are typically due the Wednesday before the Sunday publication, thus mortgage rates are nearly 4 days out-dated by the time shoppers are reading the mortgage grids.
Lastly, Fannie Mae announced it will be tightening their lending guidelines on December 12th...no doubt causing headaches for borrowers looking to obtain financing.
HomeQuest Mortgage offers a FREE Rate Alert program to assist our customers. Simply tell us what rate you desire and our team of analyst will contact you once your target rate is available. To learn more, visit www.HQWorksForMe.com.
The mortgage lending guidelines will tighten once again on December 12, 2009 making it more difficult for some borrowers to obtain a purchase loan or refinance their existing mortgage.
Fannie Mae announced it will limit the maximum debt-to-income ratio to 45% of a borrower's gross income. Previously, a borrower could qualify up to 50-55% debt ratios. Fannie Mae did mention that they will consider debt-ratios up to 50% assuming the borrower can provide "strong compensating factors". This would include high credit scores, low loan-to-values (LTV's) and/or significant cash reserves.
In addition to debt ratios, Fannie Mae will also require a minimum credit score of 620, previously the minimum was 580. Fannie Mae believes raising the minimum credit scores and tightening the debt ratios will support prudent risk management and better ensure sustainable homeownership. One can argue that this is an effort to crackdown on the loose lending standards that led to the mortgage crisis that started in 2008. Industry professionals are concerned the new requirements may offset the initiatives introduced by the government to provide more liquidity in the secondary lending market.
Current mortgage rates are at an all-time low right now, so act now and avoid these stringent guidelines. Please call a HomeQuest Mortgage representative for more details at 866-839-1117.
Mortgage interest rates are currently at the lowest levels of all time surpassing the best levels from January of this year. The new run lower in mortgage rates has been spurred on by tightening spreads between mortgage backed securities and US treasury debt. The Federal Reserve still has money left in their program to keep mortgage rates low but they have begun to wind it down.
Mortgage rates are at all time lows across the board from 30 year fixed rates to 20, 15 and 10 year fixed all the way to 5/1 and 7/1 adjustable rate loans.
Other good news in the mortgage market to go along with all time low interest rates is the announcement of the first time homebuyer tax credit being extended into next year. Also, the expanded conforming jumbo loan limits will also be carried over into next year. Both of these programs were originally going to expire in 2009. This helps open up the guidelines and allow more borrowers to take advantage of the low mortgage interest rates that are available.
The big current event that is impacting both the mortgage market and the equity markets today is news out of Dubai that Dubai World, the city-state's largest corporate entity, has asked it's creditors for a 6 month break on payments of $60 billion (60,000,000,000) in debts. This has caused concern that the worst of the financial crisis might not be over. Yields on US treasuries have moved lower this morning as stocks have been declining. US treasuries are used as a benchmark for Mortgage Backed Securities which have also seen their yields dropping (leads to lower mortgage rates) this morning.
Mortgage interest rates have been falling over the past month back to the best levels of the year. This drop in mortgage rates has happened despite a strong rally in the stock market. Usually when stocks rally, mortgage rates get worse.
Many analysts think that the stock market is overbought and will sell off soon. If that were to happen then we could see mortgage rates move even lower. One thing working against mortgage rates is the Federal Reserve beginning to wind down their purchase of Mortgage Backed Securities (MBS). This program was started at the beginning of the year in an effort to tighten the spread on MBS and bring mortgage rates down. Originally the Fed was going to use $1.25 trillion dollars to buy mortgage backed securities by the end of this year. On Wednesday the Fed announced that instead of spending all $1.25 trillion by the end of this year, they would be slowing their daily purchases of MBS so that the funds are not gone until the end of March 2010. As the Fed buys less MBS each day in order to make the $1.25 trillion last longer and gradually exit the market, mortgage rates could begin to go up.
It is always hard to predict where mortgage rates are headed. In the current times it is even more difficult because of the unprecedented Fed involvement and the uncertainty about how much rates will increase up when the Fed exits the market.