The consumer confidence report came out this morning and it was worse than expected. The reading shows consumer confidence at 38.0, lower than the expected level of 45.8. This is the lowest monthly reading ever reported by the Conference Board.
As we have discussed in the past, bad news for the economy normally leads to support for mortgage rates. This news that came out today shows that the economy will most likely not be starting a recovery anytime soon and should help keep mortgage rates from going much higher for now.
Mortgage Backed Securities have been under some year end selling pressure lately and the result is mortgage rates have come off their recent lows. The increase in mortgage rates have been minimized by the slow economy and economic reports, like the consumer confidence report from this morning, coming in worse than expected.
Mortgage interest rates are still near historic lows and offer a great opportunity to refinance into lower rates for many people. It is also a good time to take advantage of low house prices combined low fixed mortgage rates and look into buying a home.
You can always check the current mortgage rate options by checking the homepage of our website which is updated daily.
Mortgage rates in Massachusetts look like they will begin the holiday shortened work week slightly higher after hovering around historic lows recently.
30 year fixed rates should still be available in the low 5% range this week. With so much uncertainty in the market it is hard to predict where rates will go on any given day. This is why it is important to lock an interest rate when one is available that makes sense for you to refinance at. There is no guarantee that rate will be available the next day.
There is not much news scheduled for this week that will have an impact on the mortgage market. We will update you though if any mortgage rate news comes out.
As more and more borrowers realize that mortgage rates in Massachusetts and all of New England are at historic lows, they are inquiring about the possibility of refinancing into a lower interest rate. Once they find out they have the credit scores and income to qualify the next obstacle is home values. To get the lowest interest rate and avoid paying Private Mortgage Insurance (PMI) you need the loan amount to be 80% of the home appraised value. Given the current state of the housing market, many borrowers are discovering that they no longer have the required 20% equity, even if they did just a few months ago.
This is when PMI comes into play. A lot of people immediately think of PMI as a bad thing. It adds to the monthly mortgage payment without helping to pay down the balance of the mortgage. A lot of people don't realize that going from a loan with no PMI to a loan with PMI might still be a good move.
One reason having PMI on your new loan could be a good option is that in some cases it may be used as a tax deduction. You will have to consult a tax advisor to see if this deduction can be applied to your taxes. If it can, it will help reduce the actual cost of the PMI.
Another reason PMI is not as bad as it may initially seem is because it is not a permanent expense. On conforming loans the PMI may be eliminated once you have 20% equity in the home. Once it is removed you will be left with the original interest rate and no PMI payment.
Interest rates are at historic lows right now making it possible for many people to reduce their current mortgage payment, even if their new loan has PMI. For example, say you bought a home 3 years ago for $400,000 with a 20% down payment. You took out a loan for $320,000 and got a fixed at 6.375% with monthly principal and interest payments of $1,996.38. Now that rates have come down, you have the option to refinance into a 30 year fixed loan amount of $315,000 at 5.00% with monthly principal and interest of $1,690.99 per month. The only problem is that your home now appraises for $360,000 due to the weak housing market, leaving you with a little more than 10% equity in the home. PMI is now required on the loan in order to get the lowest rates. In this scenario you could expect to have to pay a PMI payment of about $130 per month.
Even with the new PMI on the loan, your total payment would still be $175.39 less than you were currently paying. And once you have 20% equity in the home again, the PMI would fall off and you would then be saving $305 per month compared to the loan you had with an interest rate of 6.375%. Once you factor in potential tax savings from the PMI it becomes clear that it is worth it to refinance even if you no longer have the 20% equity in your home.
To see if it makes sense for you to refinance given the historically low 30 year fixed rates that are currently available, give us a call at 508-839-1117 to talk with one of our loan officers.
On Tuesday December 16th
the Federal Open Market Committee (FOMC or "The Fed") will release a statement after its scheduled meeting. Many economists are expecting the Prime rate to be lowered to 3.5% at this meeting. One important thing to remember is that a lower Prime rate does not translate into lower fixed mortgage rates. See our article from November 16th http://www.hqworksforme.com/mortgage-blog/bid/6768/What-determines-mortgage-rates
for more information on what determines mortgage rates.
There are a couple of other news items coming out this week that could have an impact on mortgage rates. The first piece of data will be released on Tuesday is the Consumer Price Index (CPI). The CPI will give investors an idea of what direction prices for goods and services in the economy are going. A higher than expected reading (more inflationary) will be bad for mortgage rates while a lower than expected number (less inflationary or even deflationary) could provide support.
On Thursday the Philadelphia Fed Index is released. This reports on the level of manufacturing activity in the Philadelphia region and is seen as a strong indicator for national manufacturing activities. If this number is worse than expected it should provide support to mortgage rates because generally a weak economy leads to increased investment in fixed income, like mortgage backed securities (MBS).
Current 30 year fixed mortgage rates remain at all time lows and depending on how things look this week in the economic reports, they could be sticking around into the new year.
Current mortgage rates will be low again this week as the rally in mortgage rates that started on November 26th looks to be sticking around longer than some previous rallies this year. This is good news for borrowers that are looking to refinance a current mortgage or purchase a home. One of the main goals the Treasury has is to try and stimulate the housing market and bring some potential buyers off the sidelines with the lower mortgage rates.
One news item coming out this week that could impact mortgage rates is the Retail Sales report which will be released on Friday. This report is expected to show that retail sales were lower by 1.4% in November. A worse than expected reading would be bad news for the economy and could support lower mortgage rates. A better than expected reading would be a positive sign for the economy and most likely lead to higher mortgage rates.
Other than the Retail Sales report, any new announcements from the Federal Reserve or the Treasury about Mortgage Backed Securities (MBS) could swing rates one way or the other. For the most up to date information on mortgage rates in Massachusetts along with the other states in New England that HomeQuest is licensed in, call 508-839-1117 and ask to speak with one of our loan officers.
Current mortgage rates have remained near the lowest levels of the year so far this week . The spread of mortgage rates compared to the 10 year treasury is beginning to widen so that could be a sign that once the 10 year yield starts to increase, mortgage rates could follow very quickly. If there is a rate available now that you like, it would be a good move to lock in while it is available.
Some news coming out later this week that could have an impact on mortgage rates includes the unemployment rate which will be released on Friday.
For now mortgage rates in Massachusetts remain near all time lows. Rates in the rest of New England are also currently at the best levels of the year.