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.