Mortgage rates improved Thursday, February 27th and are now getting close to early February's levels, which were the lowest since November 2013. Much of the positivity may owe itself to temporary factors including geopolitical turmoil and month-end trading dynamics in the bond markets that most directly inform mortgage rates. After moving down to 4.375% yesterday, today's most-prevalently quoted rate for the best scenarios remains unchanged, but closing costs will be slightly lower. When adjusted for changes in closing cost, rates would be down 0.03% on average.
If you are in the market for a purchase or refinance, now might be the time to lock in and take advantage of these pricing opportunities.
Freddie Mac has released the results of its Primary Mortgage Market Survey, showing average fixed-rate mortgages (FRMs) continuing to edge higher as 2014 begins, with the 30 Year Fixed Rate averaging 4.53 percent with an average 0.8 point for the week ending Jan. 2, 2014, up from last week when it averaged 4.48 percent. A year ago at this time, the 30-year FRM averaged 3.34 percent. The 15 Year Fixed Rate FRM this week averaged 3.55 percent with an average 0.7 point, up from last week when it averaged 3.52 percent. A year ago at this time, the 15-year FRM averaged 2.64 percent.
"Mortgage rates edged up to begin the year on signs of a stronger economic recovery," said Frank Nothaft, vice president and chief economist, Freddie Mac. "The pending home sales index inched up 0.2 percent in November, after five consecutive months of decline. The Conference Board reported that confidence among consumers rose in December and the S&P/Case-Shiller 20-city composite house price index rose 13.6 percent over the 12-months ending in October 2013."
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.05 percent this week with an average 0.4 point, up from last week when it averaged 3.00 percent. A year ago, the five-year ARM averaged 2.71 percent. The one-year Treasury-indexed ARM averaged 2.56 percent this week with an average 0.5 point, unchanged from last week. At this time last year, the one-year ARM averaged 2.57 percent.
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.