Yesterday the 10-yr T-note’s yield closed at 1.90% after hitting lows early in 2012 of 1.52%? What the heck happened?
What happened was that the Federal Reserve released the minutes from its last Open Market Committee (FOMC) meeting, and although 12 voting members thought the bond purchases would be warranted through the end of this year others felt the purchases should be slowed or stopped altogether before the end of 2013. This group was concerned that too much bond buying by the Fed might destabilize the economy. Federal Reserve policy makers said they will probably end their $85 billion monthly bond purchases sometime in 2013; Participants who provided estimates were “approximately evenly divided” between those who said it would be appropriate to end the purchases around mid-2013 and those who said they should continue beyond that date.
Suddenly the market answered what folks have been asking for a while: “Where would rates go if the Fed wasn’t there to support the yields and prices?” Asset purchases are not forever: it’s not that markets think that The Fed’s purchases of MBS (the “mortgage backed securities” that most directly influence mortgage rates) or Treasuries will be stopping any time soon, but however long a particular market participant thought that Quantitative Easing (QE) would continue, that time frame was either shortened or called into question after yesterday’s data.
Rates on 30-year Fannie Mae (FNMA) loans worsened .25 while the 10-year note rate increased to 1.90%.
So… maybe the “free ride” (if you can call a $15 TRILLION deficit “free”) is almost over? My suggestion:
Short term (days/weeks) – the damage is already done but you may still want to lock in your mortgage rate now.
Long term (weeks/months) – once the market digests the data and realizes nothing is imminent, rates may come down a bit so floating might be prudent.
Either way, rates are great – call me to get a great one for yourself! Todd Abelson at Sunstreet Mortgage (520) 331-LEND (5363)
CHICAGO (MarketWatch) — Mortgage rates jumped again this week, with rates on the 30-year fixed-rate mortgage reaching a seven-month high and the 15-year fixed-rate mortgage above 4% for the first time since the end of July, according to Freddie Mac’s weekly survey of conforming mortgage rates.
“Market concerns over stronger economic growth that, in the near term, could lead to an increase in inflation have sparked a rise in bond yields and mortgage rates have followed,” said Frank Nothaft, chief economist of Freddie Mac, in a news release.
Interest rates on the 30-year fixed-rate mortgage averaged 4.83% for the week ending Dec. 16, up from 4.61% last week. The mortgage averaged 4.94% a year ago.
Fifteen-year fixed-rate mortgages averaged 4.17%, up from 3.96% last week. The mortgage averaged 4.38% a year ago.
Adjustable-rate mortgages also rose, with the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaging 3.77%, up from 3.6% last week. The ARM averaged 4.37% a year ago.
And 1-year Treasury-indexed ARMs averaged 3.35%, up from 3.27% last week. The ARM averaged 4.34% a year ago.
To obtain the rates, all mortgages required an average 0.7 point. A point is 1% of the mortgage amount, charged as prepaid interest.
“The growth in retail sales excluding automobiles in November was twice that of the market consensus forecast. Industrial production showed the biggest gain in November since July, according to the Federal Reserve Board. And consumer sentiment, as measured by the Thomson Reuters/University of Michigan index, rose to a six-month high in December,” Nothaft said.
“As a result, interest rates for 30-year fixed mortgages this week were the highest since the week of May 20 of this year,” he said.
But it’s possible that rates will head lower in the weeks ahead, said Paul Anastos, president of Mortgage Master, an independent mortgage lender based in Walpole, Mass.
“I don’t think we will hit the lows that we did hit, but I think the rates will bounce back,” Anastos said. “I don’t see enough good economic trends to say that the rates will stay high.”
Those in the market to buy a home shouldn’t change their approach as a result of higher rates, he said. More important to prospective buyers is whether they have a job, are confident they’ll keep it and are sure that the home is affordable for the long term, he added.
But for those in the market to refinance, act now if it will save you money or — if you also believe that rates could reverse course — get your paperwork in order before rates do drop so you’re ready to take action when it’s time, Anastos said.
“There are definitely a lot of people who missed the opportunity,” he said. When rates are near record lows for such a long stretch, “you almost get complacent that the rates will continue to stay low.”
Amy Hoak is a MarketWatch reporter based in Chicago.
Consumer confidence is rising, too. Though still below the long-term trend, confidence in the future up-ticked in October.
The current confidence reading is now double the low-point from February 2009.
It’s no surprise that both Retail Sales and Consumer Confidence are higher. They correlate in a common-sense-type manner. When consumers are more confident in the economy, they’re more likely to spend their money. This, in turn, leads to more purchases and rising retail receipts.
Unfortunately, for home buyers and rate shoppers in Tucson , it also leads to rising mortgage rates.
Because consumer spending accounts for two-thirds of the economy, spending growth leads to economic growth. But it’s been a lack of growth that’s kept mortgage rates this low.
When the growth starts, the low rates end. It’s why mortgage rates have added as much as 1/2 percent over the past 10 days. Consider the recent “good news”:
The days of 4 percent, 30-year fixed rate mortgages may be nearing its end. If you’re still floating a mortgage rate or thinking of buying or refinancing, consider the impact of rising rates on your budget.
The time to act may be sooner than you had planned.
Mortgage markets improved last week overall, but barely. After making a sizable move lower through Monday, Tuesday and Wednesday, mortgage pricing jumped Thursday and Friday. Nearly all of the early-week gains were erased.
Conforming mortgage rates in Arizona ended the week slightly improved.
There wasn’t much economic news on which for markets to trade last week. In its absence, bond traders took cues from the currency markets, among other things.
Mortgage rates are closely tied to the value of the U.S. dollar. This is because mortgage bond investors are repaid in U.S. dollars and, as the dollar gains value, demand for dollar-denominated bonds tend to grow.
More demand for bonds raises prices which, in turn, lowers rates.
Bond prices and bond yields move in opposite directions.
The dollar was strong in the first part of last week, then weakened through Friday’s close with the G-20 meeting looming. Mortgage rates trended along similar lines.
This week, there’s a return to data and mortgage markets should respond — especially because the week is housing-data heavy. Housing is believed to be a key part of the country’s ongoing economic recovery.
Monday : Existing Home Sales
Tuesday : Case-Shiller Index, Consumer Confidence, Home Price Index
Wednesday : New Home Sales
Thursday : Initial and Continuing Jobless Claims
Mortgage rates are near all-time lows and it’s unclear whether they’ll stay this low, or start rising. Either way, if you haven’t talked to the Tucson Mortgage Team about a refinance at today’s great pricing, set aside some time this week to do that. You can give us a call at 520-331-LEND (5363)
Once rates reverse higher, they’re unlikely to fall back down.
Tucson It Is Time To Refinance? Mortgage Rates Down 1.00 Percent Since April.
30-year fixed mortgage rates rose last week, marking the first time in a month that rates failed to fall week-to-week.
The data sources from Freddie Mac, one of the government’s major mortgage securitizers and a sister entity to Fannie Mae. Each week, Freddie Mac collects mortgage rate data from more than 120 lenders nationwide and publishes the results in a report called the Primary Mortgage Market Survey.
According to this week’s PMMS, the 30-year fixed rate rose 0.02% and now averages 4.21% nationally. The average accompanying cost is 0.8 points.
1 point is equal to 1 percent of the loan size.
Note, though, that these are just averages. Just as real estate markets are local, mortgage rates can be, too. As an illustration, look how this week’s rates break down by region:
Northeast : 4.22 with 0.8 points
Southeast : 4.30 with 0.8 points
N. Central : 4.19 with 0.8 points
Southeast : 4.23 with 0.7 points
West : 4.17 with 1.0 points
The rate-and-fee combination you’d get in your home state of Arizona , in other words, is different from the rate-and-fee combination you’d get if you lived somewhere else. In the West, rates are low and fees are high; in the Southeast, it’s the opposite.
The good news is that, as a rate shopper, you can have it whichever way you prefer. If getting the absolute lowest mortgage rate is worth the extra cost to you, the Tucson Mortgage Team mortgage team can help. Or, if you prefer higher rates and lower costs, you can go that route, too.
Banks offer multiple mortgage set-ups to meet every type of budget and, with rates down 1.00% since April 8, there’s good cause to call your loan officer about a mortgage refinance. See what set-up will work best for you.
What’s Ahead For Mortgage Rates This Week : October 4, 2010
In other words, the economy is in recovery, but the average Tucson citizen isn’t believing it. That causes purse-strings to stay tight, thereby retarding economic growth.
Wall Street is struggling with the contrast, and constantly changing its outlook. It’s making mortgage rates tough to pin down and this week should reflect that. In addition to a home sales report and new consumer confidence data, the government prints its market-moving Non-Farm Payrolls report.
More commonly called “the jobs report”, Non-Farm Payrolls details the workforce, its size, and its Unemployment Rate. There’s expected to be little change from August, a month considered “fair” by recent employment standards. If the jobs report shows improvement and/or strength, look for mortgage rates to rise. If the report does deterioration and/or weakness, look for mortgage rates to fall.
The Non-Farm Payrolls will be released Friday at 8:30 AM ET.
The Federal Reserve Meets Today. Should You Lock Your Rate Before It Adjourns?
The Federal Open Market Committee adjourns from its 6th scheduled meeting of the year today, and 7th overall.
Upon adjournment, Federal Reserve Chairman Ben Bernanke will release a formal statement to the market. In it, the Fed is expected to announce “no change” to the Fed Funds Rate.
Currently, the Fed Funds Rate is within a target range of 0.000-0.250 percent. It’s been at this same level since December 2008.
Note that the Feds Funds Rate is not “a mortgage rate” — nor is it a a consumerrate of any kind. The Fed Funds Rate is a rate that defines the cost of an overnight loan between banks. And, although the Fed Funds Rate has little direct consequence to everyday Tucson homeowners, it is the basis for Prime Rate, the interest rate on which most consumer cards are based, plus many business loans, too.
Therefore, because the Fed Funds Rate won’t change today, neither will credit card rates. Mortgage rates, however, are a different story. Mortgage rates should change today — regardless of what the Fed does.
It’s more about what the Fed says.
In its statement, the Federal Reserve will highlight strengths and weaknesses in the economy, and threats to growth over the next few quarters. Depending on how Wall Street interprets these remarks, mortgage rates may rise or fall.
If the Fed’s comments signal better-than-expected growth, bond markets should lose and mortgage rates should rise. Conversely, if the Fed’s comments signal worse-than-expected growth, mortgage rates should fall.
If you’re actively shopping for a mortgage, it may be prudent to lock your rate ahead of the Fed’s announcement today. The Fed adjourns at 2:15 PM ET. Call the Tucson Mortgage Team at 520-331-LEND (5363) to lock your rate.
Want a lower mortgage rate on your upcoming Tucson home buy? Think about moving up the closing date.
The reason is rooted in “rate locks”, a bank’s guarantee to honor a specific mortgage rate for a specific, finite period of time. Rate locks allow home buyers to reserve mortgage rates today even though their respective closings may be scheduled as far as a year into the future.
A rate lock is a contract. No matter what the “current market rate” is at the time of closing, the bank will honor the terms of the original rate lock.
It would be like making an agreement to buy Microsoft stock at a specific price 60 days from now. No matter what the price, you already know what you’re paying for it.
In this sense, rate locks are predictions about the future and, meanwhile, as we all know, the future can be a challenge to forecast. Lenders know this, too, of course, so it’s easy to understand why longer rate locks tend to be more expensive than shorter ones.
The longer the rate lock, the more risk to the bank.
To compensate for this “time risk”, therefore, lenders typically step-up pricing for rate lock guarantees as lock period lengthen.
15-day rate lock : The best of all pricing
30-day rate lock : 1/8 percent extra cost versus the 15-day rate lock
45-day rate lock : 1/4 percent extra cost versus the 15-day rate lock
60-day rate lock : 3/8 percent extra cost versus the 15-day rate lock
One percent of “extra cost” is defined as one percent of the borrowed amount.
Now, this incremental price chart is just a rough guideline; exact spreads vary from lender-to-lender. Overall, however, it’s fairly close.
That’s why it’s important to manage your closing date vis-a-vis your mortgage rate. Closing in 30 days versus 31 can save you an eighth-percent in closing costs. Assuming a loan size of $200,000, that’s $2,500 saved.
So, when negotiating a closing date on a contract, keep in mind the math of mortgage rate locks. The shorter its length, the more money you might save.
Give the Tucson Mortgage team a call at 520-331-5363 (LEND) to discuss your potential savings based on you lock period.