Archive for the ‘Mortgage Rates’ Category

Fed Funds Rate vs 30-Year Fixed Rate MortgageMortgage markets improved again last week despite an inflation-acknowledging statement from the FOMC and stronger-than-expected jobless data.

Usually, events like this would lead mortgage rates higher, but violence in the Middle East and worsening fear for public safety in Japan took center stage instead, spurring a massive, global flight-to-quality instead.

Rate shoppers in Peoria  benefited.

As safe haven buying increased last week, conforming mortgage rates dropped, falling to their lowest levels since January. It marked the 5th straight week through which mortgage rates improved and is the longest such streak since August 2010.

This week, rates may run lower again. You may not want to gamble on it, though. Here’s why.

In general, when there’s inflation in the U.S. economy, mortgage rates rise. This is because inflation devalues mortgage bonds, the underlying security on which mortgage rates are based.

So, last Tuesday, the Federal Open Market Committee met and in its post-meeting press release, the group said inflation pressures were building, a signal that rates should rise. It then went one step further.

To keep the economy from slipping back into recession or into disinflation, the FOMC also said it plans to keep its existing monetary policies in place for the foreseeable future.  This, too, is considered inflationary — another signal that rates should rise. And they did. 

Immediately following the FOMC announcement, mortgage rates spiked. But it didn’t last.

Starting Wednesday, the battles in Libya grew more intense, and Japan battled with its own domestic crisis (i.e. a potential nuclear meltdown). The economic implications of the events spurred the purchase of “safe” assets, and mortgage bonds improved.

And this is why mortgage rates won’t stay low for long.

Eventually, Wall Street will come to terms with Libya and Japan and the flight-to-quality will reverse. Inflation, however, is not likely to lessen. At least, not anytime soon.  Therefore, this week may represent the low-point in mortgage rates for a while. It’s important to lock your low rate while you still can.

There isn’t much economic data due this week so mortgage rates will take their cues from the broader market. If you haven’t locked a rate yet, or were waiting for rates to fall, this might be your best chance. Call your loan officer as soon as possible and get a fresh rate quote today.

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Consumer Price Index Feb 2009 - Jan 2011Mortgage rates are up 0.875% since mid-November, causing home buyer purchasing power across Phoenix to fall more than 10 percent since.

Persistent concerns over inflation are a major reason why and this week’s Consumer Price Index did little to quell fears. CPI rose for the third straight month last month.

Wall Street was not surprised.

As the economy has picked up steam since late-2010, the Federal Reserve has held the Fed Funds Rate near zero percent, and kept its $600 billion bond plan moving forward. The Fed believes this is necessary to support the economy in the near-term. 

Over the long-term, however, Wall Street worries that these programs may cause the economy may expand too far, too fast, and into runaway inflation.

Inflation pressures mortgage rates to rise.

Inflation is an economic concept; defined as when a currency loses its value.  Something that used to cost $1.00 now costs $1.05, for example. It’s not that the goods themselves are more expensive, per se. It’s that the money used to buy the goods is worth less.

Because of inflation, it takes more money to buy the same amount of product.

This is a big deal in the mortgage markets because mortgage rates come from the price of mortgage bonds, and mortgage bonds are denominated, bought, and sold in U.S. dollars. When inflation in present, the dollar loses its value and, therefore, so do mortgage bonds.

When mortgage bonds lose value, mortgage rates go up.

Inflation fears are harming Arizona home buyers. The Cost of Living has reached a record level, surpassing the former peak set in July 2008. Mortgage rates would be rising more right now if not for the Middle East unrest.

So long as inflation concerns persist, mortgage rates should trend higher over the next few quarters. If you’re wondering whether to lock or float your mortgage rate, consider locking today’s sure thing.

Mortgage rates (Feb 2010 - Feb 2011)

Mortgage rates are surging.

Over the last 7 days, conventional, 30-year fixed rate mortgage rates have jumped 24 basis points, or 0.24%, according to Freddie Mac’s weekly Primary Mortgage Market Survey.

It’s the largest 1-week spike in mortgage rates in recent history.

The 30-year fixed rate mortgage now averages 5.05% nationally. This is much, much higher than what we saw last November when mortgage rates were 4.17% and looked headed to the 3s.

That’s not the case today. In fact, it’s the opposite. 

Mortgage rates have risen quickly and fiercely this year. As of this morning, mortgage rates are higher over 9 consecutive days, marking the longest mortgage rate losing streak in the last 6 years, at least.

Note, however, that when you call your loan officer or bank, you may not be quoted the same 5.05% rate as shown by Freddie Mac. This is because Freddie Mac-reported rates are national averagesAny given mortgage rate may be higher or lower depending on its region. 

As an illustration, look how this week’s rates breaks down by area:

  • Northeast : 5.07 with 0.7 points
  • Southeast : 4.99 with 0.9 points
  • North Central : 5.09 with 0.6 points
  • Southeast : 5.06 with 0.6 points
  • West : 5.02 with 0.8 points

In other words, the rate-and-fee combination you’d be offered in your home town of Scottsdale is different from what you’d be offered if you lived somewhere else. In the Southeast, rates tend to be low and fees tend to be high; in the North Central U.S., it’s the opposite.

The good news is that, as a mortgage applicant, you can have your pricing whichever way you prefer. If getting the absolute lowest mortgage rate is what’s most important to you, have your loan officer structure your loan as in the “Southeast Style”. Or, if you prefer to have as few closing costs as possible and don’t mind slightly higher rates, ask for that type of set-up instead.

Either way, consider locking your rate as soon as possible. If rates keep rising, it won’t be long before they touch 6 percent.

Best Regards,

Timothy George

CMPS | Sr. Mortgage Consultant

AmeriFirst Financial Inc.

15111 N Pima Rd #110 | Scottsdale, AZ 85260

Cell: 602-492-6847 | Fax: 480-289-7675

FHA Mortgage Loans in Arizona

VA Mortgage Loans in Arizona 

Conventional Mortgage Loans in Arizona

Home Loans in Peoria Arizona

Mortgage Loans in Arizona Rate Quote

Phoenix Arizona Mortgage Rates

 

Mortgage rates risingMortgage markets worsened for the 7th straight day Tuesday, equaling the longest losing streak of the last 5 years.

Conventional, 30-year fixed mortgage rates are now scratching 5 percent, with FHA mortgage rates running roughly the same.

This is a huge increase from just 11 weeks ago when mortgage rates were riding an 8-month-long hot streak, and appeared headed into the 3s. Then the Federal Reserve intervened.

On November 3, as additional support for markets, the Fed announced its second round of bond buys, a $600 billion program dubbed QEII — short for Quantitative Easing, Round II. Wall Street got spooked on the news; investors feared runaway inflation.

That’s when low rates ended. Here’s why:

(A) Inflation makes the U.S. dollar lose its value,

And, (B) U.S. mortgage bond payments are paid in U.S. dollars.

Therefore, (C) Inflation makes mortgage bond repayments lose their value.

When mortgage bond repayments are worth less, bond demand falls among the global investor set and that causes bond prices to fall along with it. When bond prices fall, mortgage rates rise and that’s exactly what we’re seeing right now.

Since the Fed’s QEII announcement, mortgage rates have soared and home affordability is taking a hit.

Given recent trends, it’s probably safe to declare the Refi Boom “officially over” and the era of low mortgage rates may be over, too.  Home prices may move up or down in Scottsdale this year, but rising mortgage rates could render the point moot. If you’re looking for a great “deal” with low, long-term payments, the time to get in contract may be now.

Because of rising rates, homeowners have lost roughly 10% of their purchasing power since November.

Image Copyright (c) 123RF Stock Photos

  

Best Regards,

Timothy George

CMPS | Sr. Mortgage Consultant

AmeriFirst Financial Inc.

15111 N Pima Rd #110 | Scottsdale, AZ 85260

Cell: 602-492-6847 | Fax: 480-289-7675

FHA Mortgage Loans in Arizona

VA Mortgage Loans in Arizona 

Conventional Mortgage Loans in Arizona

Home Loans in Peoria Arizona

Mortgage Loans in Arizona Rate Quote

Phoenix Arizona Mortgage Rates

LLPA rising April 1 2011Starting April 1, 2011, loan-level pricing adjustments are increasing. Most conforming mortgage applicants will face higher loan costs.

Loan-level pricing adjustments are mandatory closing costs. They’re assigned by Fannie Mae and Freddie Mac, and based on a loan’s specific risk to Wall Street investors.

First constructed in April 2009, loan-level pricing adjustment are a means to help Fannie Mae and Freddie Mac compensate for “riskier loans” by bolstering their respective balance sheets.

Since the initial roll-out, Fannie and Freddie have amended adjustments five times. The pending April adjustment will be the 6th revision in two years.

No class of conforming borrower is exempt from LLPAs. Each loan delivered to Fannie Mae is subject to a quarter-percent “Adverse Market Delivery Charge”. That cost is often absorbed by the lender.

The remaining adjustments are grouped by category:

  1. Credit Score : Lower FICO scores carry bigger adjustments
  2. Property Type : Multi-unit homes carry bigger adjustments
  3. Occupancy : Investment properties carry bigger adjustments
  4. Structure : Loans with subordinate financing may carry bigger adjustments
  5. Equity : Loans will less than 25% equity carry bigger adjustments

LLPAs are cumulative. A borrower that triggers 4 different categories of risk must pay the costs associated with all four traits.

Loan-level pricing adjustments can be expensive — as much as 3 percent of your loan size in dollar terms.  As an applicant, you can opt to pay these costs as a one-time cash payment at closing, or you can to pay them over time in the form of a higher mortgage rate. 

The loan-level pricing adjustment schedule is public. You can research your personal scenario at the Fannie Mae website. However, you may find the charts confusing. Especially with respect to which route makes the most sense for you — paying the adjustments as cash, or paying them “in your mortgage rate”.

Phone or email your loan officer for help.

Mortgage Rate surveys are not real-time

It’s been a wild 30 days for home affordability.

Since the Federal Reserve’s November 3 press release, in which our nation’s central banker committed $600 billion to bond markets, mortgage rates have leaped, moving quicker than the news can report them.

This week is a terrific example of that.

Today, newspaper headlines in California and around the country read that mortgage rates rose 0.06% on average over the past 7 days, and that average loan fees remain unchanged at 0.8 points. The data is based on Freddie Mac’s Primary Mortgage Market Survey, a weekly poll of more than 100 lenders around the country.

Unfortunately for Scottsdale home buyers and other local rate shoppers, the Freddie Mac figures are low. Both mortgage rates and fees rose by more than what’s being reported.

Freddie Mac’s data is not real-time. It’s out of date for today’s pricing.

According to Freddie Mac, the survey’s methodology has it collecting rates from participating lenders between Monday and Wednesday, averaging the results, and then publishing that data Thursday late-morning. The problem there, as you know if you’ve shopped for a mortgage rate, is that mortgage rates change all day, every day.

Monday’s rates are unrelated to Wednesday’s rates, yet both are included and given equal weight by Freddie Mac. Some weeks, it’s not a problem; rates are relative static. 

This week was not such a week.

 

Rates were jumpy Monday and Tuesday, rising and falling throughout the course of the day. Action like that is normal. But Wednesday, mortgage bonds put forth their third-worst daily showing of the year.  Rates rose by as much as 3/8 percent between the market open and close, with the bulk of the sell-off coming late in the day. In other words, after the deadline of Freddie Mac’s survey.

Mortgage lenders accurately reported their rates to Freddie Mac, but they reported them before the market turn a turn for the worse.

The lesson is that mortgage rates are time-sensitive and can’t be captured by a weekly, average survey. When you need to know what mortgage rates are doing right now, the best place to check is with your loan officer. Otherwise, you may just get yesterday’s news.

Freddie Mac mortgage rates (January - November 2010)

Rock-bottom mortgage rates may be gone for good.  This week’s Freddie Mac Primary Mortgage Market Survey shows in numbers what Arizona rate shoppers have learned the hard way — mortgage rates are spiking.

During the 7-day period ending November 18, the average 30-year, conforming fixed rate mortgage jumped to 4.39 percent, an increase of 0.22% from the week prior.

And it’s not just rates that are soaring. The average number of points charged to consumers increased to 0.9 percent last week. For most of the year, that cost had been 0.7 percent.

One “point” is equal to 1 percent of your loan size.

With the sudden rise in mortgage rates, we have to question whether the Refi Boom is ending. Between April and early-November, conforming mortgage rates dropped more than a full percentage point and, during that time, a lot of Scottsdale homeowners capitalized on the market. Refinance activity was strong; rates cut new lows each week.

Today, however, Wall Street sentiment is different. There’s a growing concern for the future of the U.S. dollar, and that’s making mortgage bonds less attractive to investors. As demand drops, so does the underlying bond’s price which, in turn, causes mortgage rates to rise.

Buy-sell patterns like this are common. The speed at which they’re changing is not.  Mortgage lenders can barely keep up with the volatility, issuing up to 4 separate rate sheets in a day.

Therefore, if you’re shopping for mortgage rates, or wondering whether it’s finally time to join the Refi Boom, the time to lock is now. Mortgage rates should remain volatile through the New Year, at least. At what level they’ll be then, though, is anyone’s guess.