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March 2018
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Interest Rates on Mortgage Loans Decline Again

Once again, mortgage rates fall again and continued their streak of record breaking interest rates. The fixed 30-year loan fell to 4.55 percent and the 15 year declined to 3.91 percent. The Mortgage Bankers Association posted their weekly application survey and it shows that some folks are taking advantage of record-low mortgage rates.

The mortgage data report underlined the fact that most of the activity is coming from refinancing rather than home buying. The MBA survey showed a 4.5 percent increase in the overall number of home mortgage applications, and a 5.7 percent increase in the number of people who applied to refinance. So that means that mortgage refinancing represented 82 percent of all loan applications. It was notable that bad credit home equity credit line applications declined nearly 5 percent and fixed home equity rate loan application volume dropped over 2%.

Online Loan Shoppers See Lower Mortgage Rates

CBS News reported that the Greek debt crisis led to an unexpected drop in fixed mortgage rates. The Royal Bank, along with all of the other four big banks, dropped the popular five-year fixed closed mortgage 0.15 percentage points to 6.10% on Tuesday. Most banks also dropped the benchmark rate for their discounted five-year mortgage by a similar amount to 4.70%. Some online and smaller mortgage lenders offer no cost refinance loans. This is good news for online home loan shoppers who’ve experienced higher fixed mortgage rates that have risen over 1% in the last month. Many banks followed with reported lower mortgage rates for home buying in the US and Canada. Longer-term fixed interest mortgage rates typically follow longer-term bond yields. The Greek debt crisis put a stop to rising bond yields as traders moved money out of risky assets. “Both treasuries and Government of Canada bonds have recently benefited from lower mortgage interest rates in the Unites States.” Many mortgage loan experts say the lower interest rates are just temporary and note that bond yields are already edging higher as the EU’s bailout package eases Greek default concerns. Adjustable rate mortgage loans are tied to the overnight lending rate. That mortgage interest rate has been at a rock-bottom 0.25% for over a year.

Which Way Will Mortgage Rates Go?

Mortgage interest rates continue to hover around the 5% mark. Conforming, FHA and VA mortgage rates all continue to be reported in the low 5 percent range for home loans and mortgage-refinancing. There have been positive signs in the last quarter regarding job losses, the financial markets and even the housing sector, but economic recovery is likely still a few months away, Freddie Mac’s chief economist said today. In an article titled, “Are We There Yet?” the outlook from Freddie Mac’s Frank E. Nothaft for 2010 is mostly positive, although there are cautionary flags ahead – particularly with higher mortgage interest rates and the expiration of home-buyer tax credits.

Most economists will be looking at the aftermath from the government’s winding down of its purchases of mortgage loan backed securities from Freddie Mac and Fannie Mae. By discontinuing its purchase program in April, the central bank is hoping that private buyers of mortgage-backed securities will return, and rates won’t rise much after that. Investors in mortgaged-backed securities have stayed mostly on the sidelines. “U.S. Department of the Treasury MBS purchases were completed by year-end, and Federal Reserve purchases of MBS and Freddie Mac and Fannie Mae debt are scheduled to terminate by the end of the first quarter 2010 – both potentially pose the risk of a rise in mortgage rates relative to benchmark yields,” Nothaft said.

Another potential strain on interest rates is the expiration of tax credits for home buyers. Under the federal program, home purchase contracts must be signed by April 30 to qualify for the tax credits. “The tax credits have likely caused some families to purchase a home earlier than they might have otherwise, thus moving sales forward in time and helping support the housing market. High affordability and improved buyer sentiment further bolster sales,” Nothaft wrote.

So when will we get there? “While there may be some bumps along the way, the transition into economic recovery appears to be underway as we head into 2010: real economic growth in the 3 to 3.5 percent range, a cessation of job losses in the first quarter, rising home sales, and a strengthening of housing starts in some markets,” Nothaft wrote “We should be ‘there’ in the next few months, if not already.” Read the original article online.