Archive for Mortgage Rates
Fed Minutes Causes Mortgage Rates To Rise Suddenly
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The Federal Reserve has released the minutes from its last FOMC meeting, a 1-day affair held March 13, 2012. Mortgage rates in Texas are rising on the news.
For the un-indoctrinated, 3 weeks after it meets, the Federal Open Market Committee, the sub-group within the Federal Reserve that votes on U.S. monetary policy, publishes its meeting minutes.
Similar to the minutes from a corporate event, or condominium association meeting, the Fed Minutes recounts the conversations and debates that transpired throughout the meeting.
The Fed Minutes is a lengthy publication, often filling 10 pages or more. By contrast, the more well-known publication from the FOMC — its post-meeting press release — tends to span 6 paragraphs or less.
The extra detail contained within the Fed Minutes is Wall Street fodder, especially given the current economic uncertainty. Investors look to the Federal Reserve for clues about what’s next for the U.S. economy.
Lately, the minutes has made an out-sized impact on mortgage rates. The Fed’s words continue to swing the mortgage-backed bond market.
Today is no different.
March’s Fed Minutes is a dense one and markets are reacting. The text shows a central bank softly divided on future U.S. economic policy, and in debate about whether existing market stimulus should be removed.
The Fed has said that it’s expecting high levels of unemployment and low levels of inflation in the coming months, an outlook that leaves little reason to introduce a third round of stimulus. This is the primary reason why mortgage rates in San Antonio have been climbing since the Fed Minutes’ release.
Since mid-March, mortgage rates dropped on speculation that the Federal Reserve would introduce a mortgage bond purchase program this quarter. Today, those expectations have reversed.
According to the minutes, the Federal Reserve believes that additional market stimulus would only be necessary “if the economy lost momentum”, or if inflation remained too far below 2 percent per year. Currently, Core PCE — the Fed’s preferred gauge of inflation — is running slightly below 2 percent.
The Federal Reserve’s next scheduled meeting is April 24-25, 2012 — its third of 8 scheduled meetings this year.
Brought to you by Alan McNamee and San Antonio Mortgage Site 210-479-8935.Housing And Mortgage : The Experts Make Their 2012 Predictions
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As the new year begins, there are no shortage of stories telling us what to expect in 2012. Housing finished 2011 with momentum and mortgage rates closed at the lowest rates of all time.
Some expect those trends to continue through the first quarter and beyond. Others expect a rapid reversal.
Who’s right and who’s wrong? A quick look through the newspapers, websites and business television programs reveals “experts” with opposing, well-delivered arguments views. It’s tough to know who to believe.
For example, here are some “on-the-record” predictions for 2012 :
- Home prices will rise in 2012 (says Freddie Mac)
- Home prices will fall in 2012 (says CBS News)
- Mortgage rates will rise in 2012 (says American Banker)
- Mortgage rates will fall in 2012 (ays the LA Times)
The issue for buyers, seller, and would-be refinancers in San Antonio and nationwide is that it can be a challenge to separate a “prediction” from fact at times.
When an argument is made on the pages of a respected newspaper or website, or is presented on CNBC or Bloomberg by a well-dressed, well-spoken industry insider, we’re inclined to believe what we read and hear.
This is human nature.
However, we must force ourselves to remember that any analysis about the future — whether it’s housing-related, mortgage-related, or something else — are based on a combination of past events and personal opinion.
Predictions are guesses about what might come next — nothing more.
For example, at the start of 2009, few people expected the 30-year fixed rate mortgage to stay below 6 percent, but it did. Then, at the start of 2010, few people expected the 30-year fixed rate mortgage to stay below 5 percent, but it did.
All we can know for certain about today’s market is that both mortgage rates and home values are low, creating favorable home-buying conditions nationwide.
At that start of last year, few people expected mortgage rates to even reach 4 percent. Today, rates “with points” price in the 3s.
What 2012 has in store we just can’t know.
Brought to you by Alan McNamee and San Antonio Mortgage Site 210-479-8935.Despite Low Rates, Pending Home Sales Slip In August
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Despite the lowest mortgage rates of all-time, home buyers are slowing the pace at which they’re buying homes.
According to the National Association of REALTORS®, on a seasonally-adjusted basis, the Pending Home Sales Index fell 1 percent in August.
The Pending Home Sales Index measures homes under contract, but not yet sold, nationwide. In this respect, the Pending Home Sales Index is a forward-looking housing market indicator; a predictor of future home sales.
It’s one of the few national indices that “looks ahead” to future market conditions. Most housing data, by contrast, describes past events.
On a regional basis, only the South Region showed improvement in August’s Pending Home Sales Index report :
- Northeast Region: -5.8%
- Midwest Region : -3.7%
- South Region : +2.6%
- West Region : -2.4%
That said, even the value of regional data can be questioned. Like all things in real estate, the number of homes going under contract will vary on the local level.
For example, in the Northeast Region where pending home sales slipped in August, there are close to a dozen states. Some of those states performed better than others, and there is no doubt that cities and towns exist in the region in which pending home sales actually climbed.
As a national/regional report, the Pending Home Sales Index cannot show local market data and, for that reason, it’s somewhat irrelevant to everyday buyers and sellers in San Antonio. If you’re in the market to buy or sell a home today, it’s your local housing market data that matters to you.
We watch the Pending Home Sales Index because it paints a broad picture of housing nationwide. To get local market conditions, though, you’ll want to talk with a local real estate professional.
Brought to you by Alan McNamee and San Antonio Mortgage Site 210-479-8935.What Will The Debt Ceiling Agreement Do To Mortgage Rates?
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The United States is projected to reach its legal $14.294 trillion debt limit today. The limit was set by Congress February 12, 2010. The U.S. Treasury may not issue new debt beyond the debt ceiling.
Since April 2011, Congress has debated ways to remain below the nation’s $14.292 trillion borrowing limit. The debate commenced with the passage of the 2011 U.S. Federal Budget which featured a $1.645 trillion deficit.
This multi-trillion dollar deficit ensured that the debt ceiling would be touched at some point during the current fiscal year.
That date was May 16. It took an intervention from the Treasury Secretary to temporarily extend the limits; an “extraordinary measure” meant to keep the U.S. government from defaulting on its debt.
With additional room to borrow, then, the U.S. Treasury’s new debt ceiling date was moved to August 2. Congress has been debating the federal budget since mid-May with the dual-goal of (1) Remaining below the federal debt limit, and (2) Creating a budgetary surplus for the future.
An agreement is expected today.
For home buyers and rate shoppers in San Antonio , this is an important development. The debt ceiling agreement will influence mortgage markets and, as a result, require amendments to home affordability calculations. As mortgage rates change, your purchasing power does, too.
Unfortunately, we don’t know in which direction mortgage rates will go.
Since the prospect of a deal was first hinted Friday, mortgage rates have been improving. Conforming, 30-year fixed rates are down nearly 0.250 percent, lowering a $150,000 mortgage payment by $22 per month.
The final deal terms of a deal, however, could lead rates higher.
As always, the safest play is to lock your mortgage rate if you are comfortable with its proposed payment. Yes, mortgage rates may move lower in the future but, then again, maybe they’ll move higher.
Brought to you by Alan McNamee and San Antonio Mortgage Site 210-479-8935.Mortgage Rates Surge On May Retail Sales Figures
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The jobs market is recovering slower than expected, and so is housing. But neither condition has slowed U.S. consumers.
According to the Census Bureau, Retail Sales rose for the 11th straight month in May. Excluding cars and auto parts, sales receipts climbed to $322 billion last month. It’s an all-time high and another example of the U.S. economy’s resiliency.
Wall Street didn’t expect such results. As a result, mortgage rates worsened Tuesday.
By a lot.
The connection between Retail Sales and mortgage rates can be fairly tight in a recovering economy. Retail Sales accounts for almost half of all U.S. consumer spending, and nearly one-third of the economy overall. The May report, therefore, showed the economy may be on more solid footing than economists expect.
Plus, lately, as the economy goes, so go mortgage rates in San Antonio and nationwide.
When the economy has shown signs of life, mortgage rates have increased. When the economy has shown signs of a slowdown, mortgage rates have dropped.
It’s why mortgage markets reacted the way they did Tuesday; May’s Retail Sales data was strong. The resultant surge in conforming mortgage rates — from market open to market close — turned into one of the year’s fiercest, raising average mortgage rates well off their 7-month lows established earlier this week.
At today’s rates, each 0.125 percent change in rates yields a payment difference of $7.50 per $100,000 borrowed. Yesterday, some product rates rose by as much as 0.250 percent. It put a dent in home affordability and household budgets.
With Retail Sales are up 8 percent from last year, therefore, and showing few signs of a slowdown, today may be a prudent date to lock a rate with your lender. As the economy continues to grow, rates are expected to rise.
Brought to you by Alan McNamee and San Antonio Mortgage Site 210-479-8935.What’s Ahead For Mortgage Rates This Week : March 14, 2011
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Mortgage markets improved last week in a week of few economic releases. The one major data point — Retail Sales — showed stronger-than-expected, but markets reacted mildly. The report’s strength was whispered in advance of the actual release; its reading validated Wall Street’s growing faith in the U.S. economy.
Most action last week revolved around the Middle East:
- Libya’s internal turmoil continued
- Bahrain clashes intensified
- Saudi Arabia’s citizens planned a Day of Rage
In response to these events, Wall Street continued its flight-to-quality. Mortgage-backed bonds are now at their best levels since early-February. Mortgage rates have improved 4 straight weeks.
Unfortunately for rate shoppers in Texas , the gains have been meager. Conforming mortgage rates have only dropped slightly.
This week, however, the market could move in either direction.
The biggest news on tap is the Federal Open Market Committee’s 1-day meeting, scheduled for Tuesday. The Fed is expected to leave the Fed Funds Rate near 0.000 percent, but that doesn’t mean that mortgage rates won’t change. The FOMC’s post-meeting press release will be closely scrutinized on Wall Street. Any changes in theme, tone, or message will cause mortgage rates to dart.
This week also marks the return of housing data with Housing Starts, Building Permits, and Homebuilder Confidence due for release. Housing is believed to be key to the economic recovery so strength in these reports should lead mortgage rates higher.
In addition, several inflation-related data sets will be released including Consumer Price Index and Producer Price Index. Inflation is generally bad for mortgage rates and with gas prices rising to a multi-year high, pressure will be on for mortgage rates to rise.
Lastly, there’s Japan.
The nation’s earthquake, tsunami, and (now) looming nuclear threat will have implications on the global bond market. Mortgage rates may benefit while the crisis remains unresolved.
If you’ve floated a mortgage rate over the past few weeks, it may be time to lock that rate down. Economic factors should be pushing rates higher, but geopolitics and natural disasters are keeping them low.
It’s a perfect time to commit to a loan.
Brought to you by Alan McNamee and San Antonio Mortgage Site 210-479-8935.Loan Fees Set To Rise For Conforming Mortgage Applicants
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Beginning April 1, 2011, Fannie Mae is increasing its loan-level pricing adjustments. Conforming mortgage applicants in Texas should plan for higher loan costs in the months ahead.
If you’ve never heard of loan-level pricing adjustments, you’re not alone; they’re an obscure mortgage pricing metric and, thus, are rarely covered by the media. That doesn’t make them any less relevant, however.
LLPAs are mandatory closing costs assessed by Fannie Mae and Freddie Mac, designed to offset a given loan’s risk of default. LLPAs were first introduced in April 2009.
This April’s amendment is the 6th increase in 2 years. LLPAs can be costly.
In addition to an up-front, quarter-percent fee applied to all loans, there are 5 additional “risk categories” in the LLPA equation:
- Credit Score : Lower FICO scores trigger additional costs
- Property Type : Multi-unit homes trigger additional costs
- Occupancy : Investment properties trigger additional costs
- Structure : Loans with subordinate financing may trigger additional costs
- Equity : Loans with less than 25% equity trigger additional costs
Adjustments range from 0.25 points (for having a 735 FICO score) to 3.000 points (for buying an investment property with just 20% downpayment). And they’re cumulative. This means that a borrower that triggers 3 categories of risk must pay the costs associated with all 3 traits.
Loan-level pricing adjustments can be expensive — up to 5 percent or more of your loan size in closing costs. The fees can be paid a one-time cash payment at closing, or they can be paid in the form of a higher mortgage rate.
The loan-level pricing adjustment schedule is public. You can research your own loan scenario at the Fannie Mae website, but you may find the charts confusing.
Phone or email your loan officer if you’re unsure of what you’re reading.
Brought to you by Alan McNamee and San Antonio Mortgage Site 210-479-8935.What’s Ahead For Mortgage Rates This Week : February 28, 2011
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Mortgage markets improved last week as Wall Street’s concerns about the Middle East trumped its fears of inflation. Conforming and FHA mortgage rates in Texas fell to a 3-week low.
Last week marked the second straight week in which mortgage rates fell, a streak that follows four straight weeks of climbing mortgage rates.
It’s been a bout of good fortune for rate shoppers and home buyers.
In addition, according to Freddie Mac’s weekly mortgage rate survey, the average spread between conforming 30-year fixed rate mortgages and 5-year ARMs has widened further.
The two benchmark products are now separated by 1.15%. It’s the largest interest rate gap in recent history; one that yields a monthly payment difference of $68 per $100,000 borrowed.
This week, it’s unclear in what direction mortgage rates will go.
On one side, there’s ongoing unease related to protests in Libya and its neighbors, and that’s driving safe haven buying.
“Safe haven buying” describes when investors flee risky situations and put their money in the safest places possible. Mortgage bonds are one such place, so when safe haven buying is in effect, bond demand is high so bond yields (i.e. mortgage rates) fall.
On the other side, inflation is ramping up.
Recent economic data shows that the economy is expanding, and the Federal Reserve is maintaining its accommodative growth policies. Therefore, this week, the key economic event will be Friday’s jobs report. if job creation is high, expect inflation fear to re-ignite, and mortgage rates to rise.
Another risk factor for this week’s rate shoppers is that tensions begin to settle in the Middle East, or that Wall Street gets more comfortable with rising oil prices. If that happens, safe haven buying will subside and mortgage rates will resume rising.
There appears to be more reasons for mortgage rates to rise this week than for them to fall. Plan accordingly.
If you have not locked a mortgage rate yet, this week may represent your last chance to get a low one. Talk to your loan officer and make a plan.
Brought to you by Alan McNamee and San Antonio Mortgage Site 210-479-8935.What’s Ahead For Mortgage Rates This Week : February 22, 2011
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Mortgage markets improved slightly last week, rebounding from the worst 1-week loss in recent history. The gains were geopolitical, however; the result of instability in the Middle East region. Economic data was overlooked as investors made a broad-based flight-to-quality.
For just the second time in 2011, conforming mortgage rates in San Antonio fell on a week-to-week basis.
Rates shouldn’t have dropped, though. Here’s just a sampling of last week’s economic data, all of which can be tied to rising mortgage rates:
- Oil prices are soaring on supply concerns
- The Producer Price Index touched a 2-year high
- Philadelphia Fed Manufacturing Survey predicted strong Q1 growth
Furthermore, the just-released January FOMC Minutes showed an improving economic outlook from members of the Federal Reserve.
Therefore, home buyers and rate shoppers might consider last week’s rate drop a gift. Without the growing unrest in Libya, Egypt and Tunisia, mortgage rates would have moved considerably higher.
Instead, rates fell in a bout of what’s commonly known as “safe haven” buying.
In safe haven buying, global investors shun risk in favor of safer investments; usually in response to market uncertainty. Terror threats is one such event. Regime overthrow is another. Because the event’s long-term effect on markets is unknown, investors choose to move cash to safer asset classes until the future is more clear.
The extra demand for such assets drives prices up and, in the case of mortgage markets, drives rates down.
Last week, rates fell because safe haven buying was so strong. That may not be the case this week. As events play out across the globe, mortgage rates at home in Texas will be affected.
There’s a lot of economic data set for release this week, including a large series of housing-related figures. Stronger-than-expected data should cause mortgage rates to rise, safe haven buying notwithstanding.
If you’re still shopping for rates, or looking for a last chance to lock a low rate, now may be your best chance. Talk to your loan officer about a rate-locking strategy early in the week. As the situations abroad become more clear, mortgage rates should start to climb once again.
Brought to you by Alan McNamee and San Antonio Mortgage Site 210-479-8935.Retail Sales Rise For 7th Straight Month; Mortgage Rates Worsen
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If consumer spending is a keystone element in the U.S. economic recovery, a full-on rebound is likely underway.
Tuesday, the Census Bureau released its national January Retail Sales figures and, for the seventh straight month, the data surpassed expectations. Last month’s retail figures climbed 0.3 percent as total sales receipts reached an all-time high.
It’s good news for the economy which is scratching back after a prolonged recession, but decidedly bad news for people in want of a mortgage across the state of Texas. This includes home buyers and would-be refinancers alike.
Because consumer spending accounts for the majority of the U.S. economy, Retail Sales growth means more economic growth and that draws Wall Street’s dollars toward riskier investments, including equities, at the expense of safer investments such as mortgage-backed bonds.
On the heels of the Retail Sales report’s release, bond prices are falling this morning. As a consequence, mortgage rates are rising. It’s the same pattern we’ve seen since mid-November — “good news” about the economy sparks a stock market frenzy, casuing mortgage bonds to rise.
A sampling of other recent good-for-the-economy stories include:
- Corporate earnings are rising quickly (Marketwatch)
- Existing Home Sales up 12% month-over-month (CNN Money)
- The Fed says the economy looks “brighter” (Bloomberg)
The days of 4 percent, 30-year fixed rate mortgages are over. 5 percent is the new market benchmark. Unless the economy keeps showing strength. Then, that number may rise to six percent.
If you’re thinking of buying or refinancing a home, consider how rising rates will hit your budget. You may want to take that next step sooner than you had planned — if only to protect your monthly payments.
Brought to you by Alan McNamee and San Antonio Mortgage Site 210-479-8935.
