Why Mortgage Rates Are Rising
The spread between the 2 year and 10 year treasury yields continues to widen. Federal Reserve policies largely control the direction of shorter-dated notes, while the overall bond market and investors largely determine the direction of longer-dated bonds.
The difference between short and long-term bonds is called the ‘yield spread’ and it is a measure of varied expectations. This yield spread chart clearly shows that what the Fed policies are doing is largely different than the overall expectations from the bond market. This is one reason why interest rates on certain types of home loans such as refinance mortgages, purchase and equity loans have risen lately even as the Fed keeps its target interest rate at 0-0.25%. The bond market is seeing the future differently than the Federal Reserve.
Mortgage Interest Rates Rise
Mortgage rates on 30-year home loans rose last week and were poised to go higher as investors demanded higher rates for long-term government debt, which is closely tied to FHA mortgage rates.
Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages rose to 4.91 percent from an average of 4.82 percent the previous week. Rates in Freddie Mac’s survey have been below 5 percent for more than two months. If they rise higher, that will diminish the appeal of refinancing for many borrowers.
The yield on the Treasury’s 10-year note - a key benchmark for home mortgages and other kinds of loans - reached its highest level since November earlier this month. The worry is that rising bond yields could drive mortgage rates higher and also increase the cost of borrowing for businesses. That could short-circuit the nation’s efforts to emerge from a deep recession and the worst housing crisis in decades.
The average rate on a 15-year fixed-rate mortgage rose to 4.53 percent last week from 4.5 percent the previous week, according to Freddie Mac.
Interest rates on five-year adjustable-rate mortgages inched up to 4.82 percent from 4.79 percent while rates on one-year adjustable-rate mortgages fell to 4.69 percent from 4.82 percent.
The mortgage rates do not include points. The nationwide fee averaged 0.7 of a point last week for 30-year and 15-year mortgages, and 0.6 of a point for five-year and one-year adjustable rate loans.
Mortgage Loan Applications Increased as Interest Rates Rose
Bloomberg reported this week that mortgage loan applications in the U.S. gained last week, helped by affordable mortgage rates that enticed homeowners to seek mortgage refinancing. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 2.3% to 915.9 in the week ended May 15th, from 895.6 the week before. The group’s refinancing gauge increased 4.5%. The average rate on a thirty-year fixed mortgage loans fell for the second straight week and was near the record low reached at the end of March.
Lower borrowing costs, supported by an increase in Federal Reserve purchases of longer-term securities, and reduced prices are boosting mortgage rates for home refinancing and purchases of homes and may help settle the slumping housing market. “The broader housing market certainly looks to be stabilizing,” Zach Pandl, an economist at Nomura Securities International Inc. in New York, said before the report. “Home loan applications responded very well to the Fed’s purchases of Treasuries and mortgage-backed securities.” The mortgage bankers Association reported that their mortgage refinancing gauge rose to 4,794.4, from 4,588.6 the previous week. The purchase index fell 4.4% to 254 last week, from 265.7 the week before. The share of applicants seeking to refinance loans rose to 73.6% of total applications last week from 71.9%.
Mortgage Interest Rates Drop
Mortgage interest rates dropped based on news that the Federal Reserve has bought a total of $217 billion in securities that were mortgage backed, according to market researcher Wrightson ICAP . The Federal Reserve in New York jumped into that market and started buying debt sold off by the big mortgage finance companies that included Fannie Mae, in January.
The Federal Reserve in New York jumped into that market and started buying debt sold off by the big mortgage finance companies that included Fannie Mae, in January. It also started buying the mortgage-backed securities bundled by the agencies.
Both steps positioned the Fed as buyer in secondary mortgage markets that had seized up but are vital to enabling lenders to make new home loans. Mortgage lenders sell many of their loans to institutional investors, and higher rates charged by these investors to hold pooled bad credit mortgages make it harder for originators to offer lower rates on new mortgage loans. Conventional and FHA mortgage rates were both slightly lower than the previous week.
In a sign that the purchases are driving down rates and encouraging private investors to also step in, the gap’s dropped in just a few months between Treasuries and the interest rates that the agencies and mortgage-backed securities have to carry to make them attractive. Yields on mortgage-backed debt dropped to 0.87 of a percentage point more than Treasuries, down from 1.90 points in December, and are near the lowest seen since late in 2007, according to a Merrill Lynch index. Request mortgage rate updates for home financing with Fannie Mae, Freddie Mac and FHA interest rate updates online.
Mortgage Rates Rise, Home Refinancing Applications Decline
Unfortunately, not that many homeowners qualify for the low conventional mortgage rates that dipped below 5% a few weeks back. Even FHA home loan programs have experienced changes that require higher credit scores and more equity. Many rejected borrowers remain in search for mortgage modification plans with loan modification agreements that enable existing mortgages to be renegotiated without actually refinancing the mortgage.
Refinancing applications hit their highest levels in years after mortgage rates plummeted to record lows several weeks back, according to the Mortgage Bankers Association. But now that thirty-year fixed rate mortgages have pushed back above 5 %–to still attractive levels–interest in mortgage refinancing appears to be declining.
The Mortgage Bankers Association released its Weekly Mortgage Applications Survey for the week ending January 23, 2009. The Market Composite Index, a measure of mortgage loan application volume, was 732.1, a decrease of 38.8% on a seasonally adjusted basis from 1195.3 one week earlier…
Mortgage interest rates remain at the lowest point in decades and Investment Advisor Jill Schlesinger spoke to Harry Smith about the right time for home-buying.
Home Prices Fall Again Even with Low Mortgage Rates
The Home Refinancing Index declined 48% to 3373.9 from 6491.8 the previous week and the seasonally adjusted Purchase Index decreased 2.9 % to 294.3 from 303.1 one week earlier…The refinance share of mortgage activity decreased to 72.8% of total applications from 83.3% the previous week…The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.22% from 5.24%, with points decreasing to 1.05% (including the origination fee) for 80% loan-to-value (LTV) ratio loans.
Mortgage Interest Rates May Reduced by the Fed Again
The mortgage industry has been awaiting some good news and Michigan homeowners have been waiting out the present state-wide housing slump that could receive a big boost, particularly for those looking to refinance. If you thought mortgage rates couldn’t fall any further, think again. Some economists expect the Federal Reserve to reduce current mortgage interest rates as low as 3.85 %. That would be truly amazing. I don’t know if mortgage rates have ever been that low,” said Amanda Crews, the housing director at Metro Housing in Flint.
Fed Cuts Rates to Target Range of 0%-0.25%
Watch Roundtable Reaction to the Federal Reserve and Potential Mortgage Rate Cuts.
Currently, conventional home mortgages are being published below 5%. Just a few months back, they were in the low 6% range. A cut below four % could save home owners a ton of cash. “One thousand dollars a year for every point for a $100,000 loan — two points. That would save a borrower $200 a month after refinancing a $100,000 mortgage loan.”
The average rate on 30-year fixed mortgage loans rose last week to 5.12 %, from a record low of 4.96 % a week earlier, according McLean, Virginia-based Freddie Mac. After the Federal Reserve announced plans to buy $500 billion of bad credit home loan security bonds, rates fell from 6.46 % in October, about tripling the pace of home loan applications between the four weeks ended Jan. 16 and Nov. 21, according to the Mortgage Bankers Association. If mortgage lenders introduced even lower rates, they would not be able to handle the resulting surge in applications, Heiden said. “As mortgage interest rates improve, volume increases,” she said.
Treasury Down After Bernanke Says Fed May Buy US Debt
Treasury prices declined Tuesday as yields moved higher, with bond traders playing off Federal Reserve chief Ben Bernanke’s comments restating that the U.S. central bank could buy longer-term Treasury’s to keep loan rates low. Last week, mortgage rates dropped below 5% on thirty year mortgage loans and FHA home loans.
More aid to the banking system would be needed to foster an economic recovery, Bernanke also said in a speech he delivered in London. Two-year note yields (UST2YR) rose 4 basis points to 0.79%. A basis point is one one-hundredth of a percent. Ten-year note yields (UST10Y) were little changed at 2.31%.
The timing and strength of any global recovery remain “highly uncertain,” Bernanke said. The Fed has begun a plan to buy billions of dollars in mortgage-backed securities and debt sold by housing agencies including Fannie Mae (FNM) and Freddie Mac (FRE) to lower mortgage rates and spur growth in the housing market.
So far, the program has been successful in bringing down mortgage interest rates by reducing the gap between Treasury’s is a benchmark for many types of home loans, and yields on mortgage or agencies bonds. Bernanke also said it may expand its program to buy asset-backed securities, which pool borrowings such as car loans and credit-card debt. Also Tuesday, a government report showed the U.S. trade deficit in November plunged to $40.4 billion, reflecting weakening demand for imports as the nation’s economic woes deepened
New York Fed Begins Purchasing Mortgage-Backed Securities
The Federal Reserve Bank of New York today began purchasing fixed-rate mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. Selected private investment managers are acting as agents of the New York Fed in these purchases. Summary data detailing these operations will be available on the New York Fed’s website beginning Thursday, January 8, 2009, and will be updated on a weekly basis each Thursday.
Get updated home loan guidelines and daily mortgage interest rates online. Many insiders believe that the Fed will continue to keep interest rates low for home purchase and refinancing through 2010, or when the housing markets recover.
This program, first announced on November 25, 2008, is intended to support the mortgage and housing markets and foster improved conditions in financial markets more generally. Read the original financial article>
Fed Makes History by Cutting Interest Rates to the Lowest Level
The Federal Reserve stepped to the financial platform and announced key interest rates that reach historic levels. Mortgage lenders reported interest rates at 5% for mortgage refinancing and home financing. Many mortgage brokers believe the rumors are true that the government will induce lenders to offer mortgage rates in the 4.5% range.”
The Fed’s unprecedented move to further reduce its fed funds target rate to a range of 0 to 0.25% rather than a fixed point was a surprise. The move is an acknowledgment that interest rates in the marketplace had been well below the Fed’s 1% target, which it set at its previous meeting on October 29. The central bank also cut the lending rate for loans directly to banks. “Today was a reminder that the Fed was on the case,” said Jim McDonald, director of equity research at Northern Trust in Chicago. “It was a reaffirmation of their willingness to be very aggressive.” “What we heard today was not revolutionarily different but it was a reminder that they are committed to using their balance sheet to the fullest extent to repair the financial markets and stimulate the economy.”
Many analysts had expected the Fed would cut its fed funds rate to 0.5% from 1%. “In some senses the whole point of this meeting was to say ‘Quit watching interest rates, watch the other things that we can and will do,’” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland. Jack A. Ablin, chief investment officer at Harris Private Bank, said the fact that the Fed targeted a range for its fed fund rate indicates that policy makers did not want to bring the rate all the way to zero. Further rate cuts could have create problems with complications for money market funds, in which fees might outpace yields.
Freddie Mac Reports 30-Year Mortgage Rate Average at 4-1/2 Year Low
Freddie Mac said Thursday that the 30-year fixed-rate mortgage loan average declined from a week ago to a four-and-a-half year low as bond yields declined. The thirty-year fixed-rate average was 5.47% with an average 0.7 point for the week ending December 11th, down from 5.53% a week ago. Last year the average interest rate was 6.11%. FHA mortgage rates dropped to 5.5% for the lowest FHA home loan rates in five years for 30 year home mortgages.
The thirty-year average has not been lower since March 25, 2004, when it averaged 5.4%, Freddie Mac said. “Following the release of the November employment report, which showed the largest monthly decline in jobs since December 1974, bond yields fell slightly this week allowing fixed-rate mortgage loans room to ease back a little further,” said Frank Nothaft, Freddie Mac chief economist, in a statement. Get the latest mortgage rate updates online.
Mortgage Interest Rates Decrease Slightly
Mortgage rates dropped for a second straight week, reflecting the impact of a softening economy may have on financial mortgage markets. Freddie Mac reported Thursday that rates on thirty-year fixed-rate mortgages averaged 6.14 % last week, down from 6.2% the previous week. It marked a sharp decline since rates hit a high of 6.46% two weeks ago.
Analysts attributed the back-to-back decreases to financial markets growing more confident that the Federal Reserve will cut rates again at its final meeting of the year in December in an effort to combat a severe slowdown many economists fear could deepen into a prolonged recession. “Long-term mortgage rates fell slightly … as signs the overall economy is weakening brought interest rates down market-wide,” said Frank Nothaft, chief economist for Freddie Mac. Interest rates on other types of home loans also fell last week with the exception of one-year adjustable-rate mortgage loans. For fifteen-year fixed-rate mortgages, rates dropped to 5.81% from 5.88%. Rates on five-year adjustable-rate home loans decreased to 5.98% from 6.19%, and rates on one-year adjustable-rate mortgages edged up slightly to 5.33% from 5.25%. FHA home loan rates remained under 6%
The mortgage rates do not include points. The national average on fees for thirty- and fifteen-year mortgage loans averaged 0.7 of a point last week. The fee on five-year adjustable-rate mortgages averaged 0.6 of a point, while the fee on one-year adjustable-rate mortgages averaged 0.5 of a point. A year ago, the nationwide average rate on 30-year mortgages stood at 6.24%, 15-year mortgage rates averaged 5.88%, 5-year adjustable-rate mortgage loans were at 5.96%, and 1-year adjustable-rate home mortgages stood at 5.5% Read Complete article >
Mortgage Rates Decline Slightly
Home mortgage rates declined this week after spiking last week, continuing 5 weeks of turbulence that has seen rates interest increase and decrease unusually as the foreclosure crisis keept the credit markets in turmoil. The national average interest rate on the benchmark 30-year fixed mortgage dropped to 6.20% this week from 6.46% a week ago, Freddie Mac said in its Thursday rate survey. The mortgage rate had jumped last week from 6.04% just two weeks ago. It was at 6.46% three weeks ago and at 5.94% the week before that. A year ago the 30-year averaged 6.24%.
FHA home loan applications had dropped last week, but this week they rebounded as FHA mortgage rates decreased slightly.
The 15-year fixed-rate mortgage, a popular refinancing choice, fell to 5.88% from 6.19% a week earlier. A year ago, the loan averaged 5.90%. The five-year Treasury-indexed hybrid mortgage dropped to an average 6.19% from 6.36%, and the one-year Treasury-indexed adjustable-rate mortgage hit 5.25%, down from 5.38%. A year ago the hybrid was 5.89% and the ARM 5.50%. The 30-year and 15-year loans required the payment of an average 0.7 point to achieve the rate, while the hybrid needed 0.6 point and the ARM 0.4 point. A point is 1% of the loan amount, charged as prepaid interest.
“Mortgage rates fell this week amid new indications of a pullback in consumer spending and a weaker jobs market,” said Frank Nothaft, Freddie Mac chief economist. “The economy shrank by 0.3 % in the third quarter, led by the first decline in consumer spending since the fourth quarter of 1991. In September alone, consumer spending fell by the most since June 2004. More recently, job layoffs more than doubled in October compared to September on year-over-year basis.”
The poor economy coupled with the ongoing mess in financial markets has made getting a mortgage more difficult, Nothaft said. “With the economy contracting and experiencing record home foreclosures, mortgage lenders tightened their credit standards further, according to the October Federal Reserve Senior Loan Officer survey. Approximately 70% of banks raised their lending standards for prime mortgage loans and about 90% of banks that offer nontraditional mortgages did so as well,” he said.
Mortgage Interest Rates Spike to 6.46%
Mortgage interest rates for thirty year mortgage loans spiked this week, following a rise in long-term Treasury bonds yields. Mortgage Loan Company Freddie Mac reported Thursday that thirty year fixed-rate mortgages rose to 6.46%, which is up from 6.06% last week and above the 6.26% rate this time last year. The increase reverses a decline from 6.46 % two weeks ago. According to North Carolina mortgage broker Hayden McBride, “As the long as the rates for FHA home loans remain below 7%, we will be able to refinance people into fixed rate mortgages.”
Mortgage rates on fifteen year fixed-rate mortgages rose to 6.19% from 5.72% last week. A year ago, the rate was 5.91 %. Five-year adjustable-rate mortgage loans rose to 6.36%, from 6.06% last week. A year ago, the rate was 5.98%.The Federal Reserve Board on Wednesday reduced the federal funds rate what banks charge each other for overnight lending a half-point to 1%. Analysts say that is likely to keep short-term interest rates low, holding initial interest rates on ARMs near current levels.
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