Mortgage Rates Fall to Four-Month Lows

Mortgage Rates Fall to Four-Month Lows
Article by Daily Real Estate News; October 25, 2013

Fixed mortgage rates dropped to their lowest levels since this summer, giving a lift this week to the housing recovery.

“Mortgage rates slid this week as the partial government shutdown led to market speculation that the Federal Reserve will not alter its bond purchases this year,” says Frank Nothaft, Freddie Mac’s chief economist.

Mortgage rates have been dropping since September when the Federal Reserve decided to delay tapering its $85-billion per month bond purchasing program, which has been keeping rates low.

Freddie Mac reports the following national averages with mortgage rates for the week ending Oct. 24:

  • 30-year fixed-rate mortgages: averaged 4.13 percent, with an average 0.8 point, dropping from last week’s 4.28 percent average. That’s the lowest average for the 30-year fixed-rate mortgage since June 20. Last year at this time, 30-year rates averaged 3.41 percent.
  • 15-year fixed-rate mortgages: averaged 3.24 percent, with an average 0.6 point, falling from last week’s 3.33 percent average. Last year at this time, 15-year rates averaged 2.72 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3 percent, with an average 0.4 point, falling from last week’s 3.07 percent average. A year ago, 5-year ARMs averaged 2.75 percent.
  • 1-year ARMs: averaged 2.60 percent, with an average 0.5 point, dropping from last week’s 2.63 percent average. A year ago, 1-year ARMs averaged 2.59 percent.

Source: REALTOR(R) Magazine Daily News; Daily Real Estate News 102513 | Blog, In The News, distribution provided by Kenneth Bargers and Bargers Solutions, member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee

Freddie Mac: Rising Mortgage Rates ‘Will Not Derail the Recovery’

Freddie Mac: Rising Mortgage Rates ‘Will Not Derail the Recovery’
Daily Real Estate News | Wednesday, June 19, 2013

Rising mortgage rates shouldn’t stall the housing recovery, according to Freddie Mac’s latest U.S. Economic and Housing Market Outlook.

After steady rises the last few weeks, the 30-year fixed-rate mortgage — the most popular among home buyers — is expected to remain around 4 percent during the second half of 2013.

Despite the rising rates, housing still remains affordable. According to Freddie Mac economists, it would take interest rates rising closer to 7 percent before families earning median incomes would face housing affordability issues.

“The recent upturn in interest rates is sparking fears among some that the nascent economic and housing recoveries will be choked off before they produce sustained growth,” says Frank Nothaft, Freddie Mac’s chief economist. “Nothing in the recent trends suggests that we need to fear a major slowdown. A gradual rise in interest rates will not derail the recovery, and are an indication that the overall economic situation is improving.”

Source: Freddie Mac; “Don’t fear rising mortgage rates just yet: Freddie Mac,” HousingWire (June 18, 2013); Daily Real Estate News (061813) | Blog, In The News, distribution provided by Kenneth Bargers and Bargers Solutions, member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee

For Third Week, Mortgage Rates Sink Lower

FOR THIRD WEEK, MORTGAGE RATES SINK LOWER
Article by: Daily Real Estate News (April 19, 2013)

Average fixed-rate mortgages moved lower this week amid data showing weaker consumer spending, Freddie Mac reports in its weekly mortgage survey. It marked the third-consecutive week that mortgage rates went down.

Freddie Mac reports the following national averages in rates for the week ending April 18:

  • 30-year fixed-rate mortgages: averaged 3.41 percent, with an average 0.7 point, dropping from last week’s 3.43 percent average. A year ago at this time, 30-year rates averaged 3.90 percent.
  • 15-year fixed-rate mortgages: averaged 2.64 percent, with an average 0.7 point, dropping from last week’s 2.65 percent average. Last year at this time, 15-year rates averaged 3.13 percent.
  • 5-year adjustable-rate mortgages: averaged 2.60 percent, with an average 0.5, dropping from last week’s 2.62 percent average. Last year at this time, 5-year ARMs averaged 2.78 percent.
  • 1-year ARMs: averaged 2.63 percent, with an average 0.4 point, rising slightly from last week’s 2.62 percent average. A year ago at this time, 1-year ARMs averaged 2.81 percent.

Source: Freddie Mac; Daily Real Estate News (041913) | Blog, In The News, distribution provided Kenneth Bargers and Bargers Solutions, member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee

For Third Week, Mortgage Rates Inch Higher

For Third Week, Mortgage Rates Inch Higher
Daily Real Estate News (August 17, 2012)

Fixed-rate mortgages once again inched up this week, the third consecutive week of increases after reaching all-time lows, Freddie Mac reports in its weekly mortgage market survey.

“The latest economic indicators point toward low inflation but gradually stronger economic activity which placed further upward pressure on long-term Treasury yields and, in turn, fixed mortgage rates,” Frank Nothaft, Freddie Mac’s chief economist, said about why mortgage rates have been reversing course in recent weeks.

Here’s a closer look at mortgage rates for the week ending Aug. 16:

  • 30-year fixed-rate mortgages: averaged 3.62 percent, with an average 0.6 point, this week, increasing from last week’s 3.59 percent average. A year ago at this time, 30-year rates averaged 4.15 percent.
  • 15-year fixed-rate mortgages: averaged 2.88 percent, with an average 0.6 point, rising from last week’s 2.84 percent average. Last year at this time, 15-year rates averaged 3.36 percent.
  • 5-year adjustable-rate mortgages: averaged 2.76 percent, with an average 0.6 point, falling slightly from last week’s 2.77 percent average. Last year at this time, 5-year ARMs averaged 3.08 percent.
  • 1-year ARMs: averaged 2.69 percent, with an average 0.4 point, rising from last week’s 2.65 percent average. A year ago at this time, 1-year ARMs averaged 2.86 percent.

Source: Freddie Mac; Daily Real Estate News (August 17, 2012) | Blog distribution provided by Kenneth Bargers and Bargers Solutions, member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee

Market Comment for Week of September 20, 2010…

MARKET COMMENT   Mortgage bond prices rose last week pushing interest rates slightly lower. Tame inflation readings helped to counter the better than expected weekly jobless figures. Core producer and consumer price data was generally bond friendly. The Philadelphia Fed report showed tremendous weakness in that region. Industrial product and capacity use data also came in below estimates, which helped rates improve. 

Rates fell by about 3/8 of a discount point for the week. 

The Fed meeting Tuesday will be the most important even this week. The housing data the beginning and end of the week can result in mortgage interest rate movements. Expect more volatility, as stocks and bonds are likely to continue their back and forth trading pattern. 

LOOKING AHEAD 

  • Housing Starts; Sept. 21; Consensus Estimate Down 0.7%; Important. A measure of housing sector strength. Larger than expected decreases may lead to lower rates.
  • Weekly Jobless Claims; Sept. 23; Consensus Estimate 440k; Important. An indication of employment. Higher claims may result in lower rates.
  • Existing Home Sales; Sept. 23; Consensus Estimate Down 7.3%; Low importance. An indication of mortgage credit demand. A significant decrease may lead to lower rates.
  • Leading Economic Indicators; Sept. 23; Consensus Estimate Up 0.1%; Important. An indication of future economic activity. Weakness may lead to lower rates.
  • Durable Goods Orders; Sept. 24; Consensus Estimate Down 2.2%; Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
  • New Home Sales; Sept. 24; Consensus Estimate Down 8%; Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.

INFLATION   Inflation is an increase in the level of prices of goods and services over a period of time. Signs of inflation do not generally bode well for mortgage bonds. Inflation erodes the value of fixed income securities generally causing bond prices to fall and interest rates to rise. Tame inflation readings are usually well received. 

The mortgage bond market received mixed inflation data last week. The producer price index, a major gauge of inflation at the producer level, rose 0.4%, higher than the expected 0.3% increase. However, the core rate, which excludes volatile food and energy, rose 0.1% as expected. 

The relatively flat core producer price figure helps reinforce the belief that inflation remains in check. However, the higher than expected producer price figure supports the opposite conclusion. The consumer price release followed the same pattern. Consumer prices rose 0.3%, higher than the expected 0.2% increase. However, the core, which excludes volatile food and energy prices, was unchanged and lower than the expected 0.1% increase. Tame core inflation readings are generally good for fixed income securities such as mortgage bonds. We saw an example of this Friday morning as bond prices rose and interest rates fell. 

If future data echoes that of the core consumer price data, then it is a real possibility that mortgage interest rates can remain low. However, if future data shows inflation spikes be ready for a jump in rates. Floating in this environment is risky. The good news is that mortgage interest rates currently are historically favorable. 

Source: Courtesy of Todd Kabel, US Bank, Nashville, Tennessee

Market Comment for Week of September 6, 2010…

MARKET COMMENT   Mortgage bond prices fell last week pushing interest rates moderately higher. The up and down trading pattern continued with rates rising and falling throughout the week. Strong stocks mid week and stronger than expected ISM Index data didn’t help rates. Consumer confidence came in at 53.5, higher than the expected 49.9 mark and pressured rates. Weekly jobless claims and factory orders data were near expectations. Rates rose by about 1/4 of a discount point for the week. 

The Treasury auctions and the weekly jobless claims data will be the most important releases this week. Expect more volatility, as stocks and bonds are likely to continue their back and forth trading pattern. 

LOOKING AHEAD 

  • 3-Year Treasury Note Auction; Sept 7; Important. $33 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
  • 10-year Treasury Note Auction; Sept. 8; Important. $21 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
  • Fed “Beige Book”; Sept. 8; Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
  • Consumer Credit; Sept. 8; Consensus Estimate Down $1.1 billion; Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates.
  • Trade Data; Sept. 9; Consensus Estimate $48 billion deficit; Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
  • Weekly Jobless Claims; Sept. 9; Consensus Estimate 485k; Important. An indication of employment. An increase in jobless claims may bring lower rates.
  • 30-year Treasury Bond Auction; Sept. 9; Important. $13 billion of bonds will be auctioned. Strong demand may lead to lower mortgage rates.

TRADE DATA   In the distant past the US economy tended to be viewed as relatively unaffected by economic activity in other countries. However, increased trades with other countries and an increased reliance on foreign purchases of US debt have generated a market awareness of trade-related issues. The exchange rate of the dollar and foreign trade flows are interrelated. One must buy dollars to purchase US exports, and sell dollars to buy imports. Likewise, foreign investment in US debt requires the purchase of US dollars, and is thus affected by exchange rates. 

Each month the Commerce Department gathers an enormous amount of detailed data on exports and imports. The data is broken between goods and services trade. The overall trade balance is the dollar difference between US exports and imports on a seasonally adjusted basis. The report also highlights trade flows between the US and various partners. Since the mid-1970’s, US imports of consumer and capital goods have exceeded exports, so a merchandise trade deficit has existed. The US has always maintained a service trade surplus, and because this surplus is not enough to offset the merchandise trade deficit, a net export deficit has resulted. 

Due to the overwhelming amount of data considered, trade is difficult to forecast, and can present surprises. For a variety of reasons, the financial markets will often be unaffected by surprises in trade data. However, the data still has the ability to cause mortgage interest rate volatility. 

Source: Courtesy of Todd Kabel, US Bank, Nashville, Tennessee

Market Comment for Week of April 5th

MARKET COMMENT   Mortgage bond prices fell again last week pushing mortgage interest rates higher. The Fed ended the mortgage backed securities purchase program last Wednesday. There was no coincidence that rates spiked higher Thursday morning with the Fed no longer there to buffer negative movements and keep rates in check. Stock strength also pressured bonds as the Dow approached the 11,000 mark. Escalating oil prices also caused rates to spike higher as inflation fears begin to increase. Fortunately the PCE Price Index data came in as expected. Rates rose about 3/4 of a discount point for the week.

The Treasury auctions will once again take center stage this week. If foreign demand is lackluster like the last few auctions we could see that carry over to the mortgage bond market causing rates to spike. The Fed minutes and weekly jobless claims may also move the market this week.

LOOKING AHEAD

Economic
Indicator
Release
Date and Time
Consensus
Estimate
Analysis
3-year Treasury Note Auction Tuesday,
April 6,
1:15 pm, et
None Important. $40 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Fed Minutes Tuesday,
April 6,
2:00 pm, et
None Important. Details of last Fed meeting. Volatility may surround the release.
Consumer Credit Wednesday,
April 7,
8:30 am, et
Up $1.6 billion Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates.
10-year Treasury Note Auction Wednesday,
April 7,
1:15 pm, et
None Important. $21 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday,
April 8,
8:30 am, et
430k Moderately Important. An indication unemployment. Higher claims may lead to lower rates.
30-year Treasury Bond Auction Thursday,
April 8,
1:15 pm, et
None Important. $13 billion of bonds will be auctioned. Strong demand may lead to lower mortgage rates.

TREASURIES   The 10 and 30-year Treasury bond yields are often viewed as “benchmarks”, reflecting the overall state of interest rates in the US economy. Many people concerned about mortgage interest rates track these bonds as a barometer for mortgage interest rates. However, in reality the Treasury and mortgage markets trade independently.

The supply and demand characteristics of Treasury bonds and mortgage-backed securities (MBSs) differ. Treasury securities represent money needed to fund the operations of the US government. MBSs, on the other hand, represent borrowing by homeowners. Demand for mortgage credit is seasonal and is also affected by the state of the overall economy. In terms of demand, Treasury securities are regarded as “risk free” investments, and often benefit from a “flight to quality” in times of financial crisis. Treasury bill, note, and bond prices are dictated by yield requirements and inflationary concerns. Because homeowners can sell or refinance their homes, investors in 30-year mortgage-backed securities usually see principal repayment in significantly shorter periods of time.

In the absence of information directly related to the mortgage interest rate markets, Treasury information can be useful. However, mortgage interest rates can vary significantly. In fact, many times the Treasuries will trade wildly while MBSs only see minor price changes and vice versa.

Source:  Courtesy of Todd Kabel, US Bank, Nashville, Tennessee