Category Archives: Mortgage Rates

With LIBOR Low, Don’t Rush To Refinance Your ARM

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Pending ARM Adjustment

Is your mortgage scheduled to adjust this season? You may want to let it. This year’s ARM-holding homeowners in Pennsylvania are finding out that an adjusting mortgage may be the simplest way to get access to today’s low mortgage rates — without paying the closing costs.

Currently, conventional adjustable-rate mortgages are adjusting to near 3.00 percent.

If your home is financed via an adjustable-rate mortgage, you’re likely cognizant of your loan’s life-cycle. At first, your ARM’s initial mortgage rate is agreed upon between you and your lender, a rate that both parties agree will remain in place from anywhere from one to 10 years, with periods of five and seven years being most common.

Then, after the initial “teaser rate” expires, the mortgage’s mortgage rate adjusts according to a pre-determined formula — one that’s also agreed upon at closing. The loan is then subject to an identical mortgage rate adjustment every 12 months thereafter until the loan is paid in full.

The most common conforming mortgage adjustment formula is to add 2.25 percent to the then-current 12-month LIBOR rate.

Today’s 12-month LIBOR is 1.05% so, as a real-life example, an adjustable-rate mortgage that’s leaving its teaser rate period this week would adjust to 3.30%.

If you’re a homeowner who took a 7-year ARM in 2005, or a 5-year ARM in 2007, your newly-adjusted mortgage rate should be roughly 2 percent lower than your initial teaser rate. On a $250,000 mortgage, a 2 percent mortgage rate reduction yields $298 in monthly savings.

Therefore, if you have an adjustable-rate mortgage that’s due to reset, don’t rush to refinance it. For at least one more year, you can benefit from low mortgage rates and low payments.

As for next year’s adjustment, however, that’s anyone’s guess.

What’s Ahead For Mortgage Rates This Week : May 7, 2012

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Unemployment RateAfter two weeks of no change, mortgage markets improved last week, pushing mortgage rates lower throughout Pennsylvania.

The majority of the improvements occurred Friday after the April jobs report failed to impress Wall Street, and after it became clear that the Eurozone’s struggles with sovereign debt would continue.

According to Freddie Mac, conforming 30-year fixed rate mortgage rates fell to 3.84% nationwide, on average, for borrowers willing to pay 0.8 discount points at closing plus a full set of closing costs. 

1 discount point is equal to 1 percent of your loan size such that one discount point on a $200,000 loan would require $2,000 to be paid at-closing.

Freddie Mac’s reported rates for the benchmark 30-year fixed rate mortgage are the lowest in recorded history.

The 15-year fixed rate mortgage is also at its lowest point in history. According to Freddie Mac’s survey, the 15-year fixed averaged 3.07% with 0.7 discount points last week. One year ago, the rate was 3.89%.

This week, with a data-sparse economic calendar, mortgage markets will likely take cues from events in Europe. Notably, France has elected a new leader, one that prefers growth over austerity; and voters in Greece have “punished” austerity-backing leaders, in the process creating a split parliament.

Each event adds uncertainty to an already unstable economic environment and uncertainty favors U.S. rate shoppers.

Doubt spurs investors to seek “safe” assets and U.S. government-backed bonds — including mortgage backed bonds — meet that criteria. As demand for mortgage bonds rise, mortgage rates tend to fall.

This week, rates are starting the week improved. Whether it’s a knee-jerk reaction to Eurozone news from the weekend, or low rates are here to stay is tough to know. Therefore, if today’s mortgage rates look good to you, consider locking something in. There’s more room for rates to rise than to fall.

What’s Ahead For Mortgage Rates This Week : April 30, 2012

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Fed Funds RateMortgage markets were mostly unchanged last week for the second straight week. Spain made few moves to allay concerns from its investors, the Federal Reserve did little to change its message on the U.S. economy, and newly-released economic data was in-line with expectations.

Conforming mortgage rates in Pennsylvania idled last week, remaining near all-time lows for the 30-year fixed rate mortgage, the 15-year fixed rate mortgage; and the 5-year ARM.

According to Freddie Mac’s weekly mortgage rate survey, last week’s mortgage rates, as averaged from more than 125 banks nationwide, were as follows :

  • 30-year fixed rate mortgage : 3.88% with 0.7 discount points
  • 15-year fixed rate mortgage : 3.12% with 0.6 discount points
  • 5-year adjustable rate mortgage : 2.85% with 0.6 discount points

A discount point is a one-time closing cost and is equal to one percent of your overall loan size. This means that a mortgage applicant with a $100,000 mortgage and an accompanying 0.7 discount points would be responsible for paying an upfront charge of $700 at the time of closing.

Freddie Mac’s mortgage rates assume full closing costs, too.

This week, it’s unclear whether King of Prussia mortgage rates will rise or fall.

There are few economic data points due for release so mortgage markets are expected to take their cues from Europe where there’s no shortage of story lines.

In Spain, there are protests over new austerity measures. In France, a new President may be elected — one whom opposes austerity. In the Netherlands, a new budget passed that includes austerity measures, but barely.

Each storyline generates uncertainty about the future of Europe and its unified economy. As the uncertainty grows, global investors seek safety in the U.S. mrotgage bond market, a move that helps mortgage rate shoppers. When demand for mortgage bonds is high, mortgage rates tend to improve.

Also affecting mortgage rates this week will be Friday’s Non-Farm Payrolls report.

The economy is expected to have added 165,000 net new jobs in April and the Unemployment Rate is believed to have remained unchanged at 8.2%. If there is a deviation from either of these expectations, mortgage rates will change. If the actual jobs data is stronger than Wall Street expectations, mortgage rates are likely to rise.

If the jobs report is weak, mortgage rates should fall.

The Fed Starts A 2-Day Meeting Today. Make A Strategy.

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Fed Funds Rate vs Mortgage Rates 1990-2012

The Federal Open Market Committee begins a 2-day meeting today in the nation’s capitol. It’s the group’s third of 8 scheduled meetings this year. Mortgage rates are expected to change upon the Fed’s adjournment.

Led by Chairman Ben Bernanke, the FOMC is a 12-person, Federal Reserve sub-committee. The FOMC is the group within the Fed which votes on U.S. monetary policy. “Making monetary policy” can mean a lot of things, and the action for which the FOMC is most well-known is its setting of the Fed Funds Funds.

The Fed Funds Rate is the overnight interest rate at which banks borrow money from each other. It’s one of many interest rates set by the Fed.

However, one series of interest rates not set by the Fed is mortgage rates. Instead, mortgage rates are based on the prices of mortgage-backed bonds and bonds are bought and sold on Wall Street.

There is little historical correlation between the Fed Funds Rate and the common, 30-year fixed rate mortgage rate.

As the chart at top shows, since 1990, the Fed Funds Rate and the 30-year fixed rate mortgage rate have followed different paths. Sometimes, they’ve moved in the same direction. Sometimes, they’ve moved in opposite directions. 

They’ve been separated by as much as 5.29 percent at times, and have been as near to each other as 0.52 percent.

Today, that spread is roughly 3.65 percent. It’s expected to change beginning 12:30 PM ET Wednesday. That’s when the FOMC will adjourn from its meeting and release its public statement to the markets.

The FOMC is expected to announce no change in the Fed Funds Rate, holding the benchmark rate within in its current target range of 0.000-0.250%. However, how mortgage rates in and around King of Prussia respond will depend on the verbiage of the FOMC statement. 

In general, if the Fed acknowledges that the U.S. economy as in expansion; growing from job growth and consumer spending, mortgage rates are expected to rise. If the Fed shows concern about domestic and global economic growth, mortgage rates are expected to fall. 

Any time that mortgage markets are expected to move, a safe play is to stop shopping your rate and start locking it. Today may be one of those times.

What’s Ahead For Mortgage Rates This Week : April 23, 2012

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FOMC meets this weekMortgage markets were mostly unchanged last week, breaking a three-week winning streak. Wall Street grappled with surprising demand on Spain’s debt issuance and a series of weaker-than-expected data points on U.S. housing.

Conforming mortgage rates across Pennsylvania rose slightly according to the weekly Freddie Mac Primary Mortgage Market Survey.

Nationwide, the 30-year fixed rate mortgage rate climbed 2 basis points to 3.90%. This rate is available to homeowners willing to pay 0.8 discount points and a full set of closing costs, where 1 discount point is equal to 1 percent of the borrowed amount.

Prior to last week’s survey, just 0.7 discount points were required.

This week, mortgage rates are expected to be volatile. There is a lot of economic data due for release, the Eurozone’s issues with sovereign debt remain unresolved, and the Federal Open Market Committee gets together for a scheduled, 2-day meeting.

On the data front, the week starts with Tuesday’s Consumer Confidence figures and the government’s New Home Sales report. Both have the power to move mortgage rates. The week then concludes with the Pending Home Sales Index; the GDP release; and a series of Treasury auctions.

With respect to Europe, demand remains strong for debt from Spain, but at much higher rates as compared to several weeks ago. The same is true for Italy. Both nations are feared to be at risk of default on their respective sovereign debt. It’s a similar situation to that which occurred in Greece throughout 2011.

Long-term, lingering concerns for Spain and Italy would likely help keep U.S. mortgage rates suppressed.

And, lastly, the Federal Reserve will make a statement to markets Wednesday afternoon. The Fed is the nation’s central banker and its post-meeting press releases have tremendous influence on bond markets, including those for mortgage-backed bonds.

By extension, therefore, the Federal Reserve’s statement has the power to move mortgage rates in and around Phoenixville.

If you’re shopping for mortgage rates, it’s as good of a time as any to lock with your lender. Rates have more room to rise than to fall.

What’s Ahead For Mortgage Rates This Week : April 16, 2012

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Retail SalesMortgage markets improved last week as a global flight-to-quality continued. With Spain facing questions on its sovereign debt, investors continued to pare exposure to risky assets, sparking demand for the relative safety of U.S. government-backed mortgage-backed bonds.

As a result, conforming and FHA mortgage rates slipped for the third straight week last week. 

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the average 30-year fixed rate mortgage available to borrowers in Pennsylvania is down to 3.88% nationwide with an accompanying 0.7 discount points plus “typical” closing costs.

Last week’s reported 3.88 percent rate for the 30-year fixed rate mortgage is within one-tenth of one percent of the lowest, average mortgage rates in Freddie Mac survey history. However, the last time conforming rates were reported in this range, the accompanying, required discount points were higher than last week’s 0.7.

Meanwhile, at 3.11% nationwide with 0.7 discount points plus closing costs, the 15-year fixed rate mortgage rate is equally low. It, too, set a record last week.

It’s a good time to be looking for a mortgage in Phoenixville. Rates and fees are great.

Last week, markets moved on momentum. This week, they’ll move on data. The economic calendar is busy.

  • Monday : Retail Sales; Housing Market Index
  • Tuesday : Housing Starts
  • Thursday : Weekly Jobless Claims; Leading Indicators; Existing Home Sales

In addition, two Federal Reserve members offer prepared remarks Monday. They will be the last public Fed comments before next week’s 2-day FOMC meeting.

Mortgage rates remain low. Consider calling or emailing your loan officer to learn more about your current financing options.

Mortgage Rates Fall For Third Straight Week

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Freddie Mac Mortgage Rates

After a brief surge north of 4 percent last month, mortgage rates have settled down, near their lowest levels of all-time.  

According to Freddie Mac’s weekly Primary Mortgage Market Survey, for applicants willing to pay 0.7 discount points plus a complete set of closing costs, the average 30-year fixed rate mortgage rate fell to 3.88 percent this week.

0.7 discount points adds $700 to your mortgage closing costs for each $100,000 borrowed.

Mortgage rates are down this week on “safe haven” buying. The move is triggered by Wall Street’s concern that Spain and Italy will have trouble servicing their respective sovereign debt. In response, investors are selling risk-heavy assets and using the proceeds to purchase U.S. government-backed bonds.

This creates demand for mortgage bonds which, in turn, pressures mortgage rates lower.

The storyline is similar to what transpired in Greece last year, and, at least for now, it gives King of Prussia home buyers reason to cheer. So long as economic uncertainty remains, mortgage rates may stay low.

Of course, like all things in real estate, though, mortgage rates are local. Rates offered by banks varied by region.

Freddie Mac’s survey of 125 banks showed the following regional breakdown :

  • Northeast Region : 3.88% with 0.8 discount points 
  • West Region : 3.85% with 0.8 discount points
  • Southeast Region : 3.91% with 0.8 discount points
  • North Central Region : 3.89% with 0.6 discount points
  • Southwest Region : 3.90% with 0.8 discount points

The best mortgage “deals” are currently available to North Central Region residents. The most expensive loans are for those in the Southeast.

Relative to history, though, all mortgage rates look inexpensive. Conforming 30-year fixed rate mortgage rates have never been as low as they are today. It’s a bonus for home buyers because cheap mortgage rate yield cheap mortgage payments. Home affordability remains near all-time highs.  

If you’re unsure of whether now is a good time to buy or refinance, the answer is yes. Talk to your loan officer to review your mortgage options.

What’s Ahead For Mortgage Rates This Week : April 9, 2012

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Spain mortgage ratesIn a week of up-and-down trading, mortgage markets improved for the second consecutive week last week. Weaker-than-expected jobs data plus evidence of a slumping Eurozone took mortgage bonds lower, capped by a furious Friday morning rally that dropped mortgage rates to near-record levels.

Once again, volatility ruled the bond pits.

Tuesday afternoon, after the release of the Fed March Minutes, mortgage rates spiked. Some products climbed as much as 0.250 percent. The surge stemmed from the Fed Minutes showing Federal Reserve members hesitant to begin new rounds of market stimulus without a demonstrated, national economic slowdown. 

Wall Street hadn’t expected the Fed’s verbiage to be so well-defined. With little evidence that such a slowdown was underway — the economy has shown two straight seasons of consistent, steady growth, after all — equity markets rallied and bond markets sunk, causing mortgage rates to rise.

By Wednesday, however, rates had started to fall. 

Civil unrest in Spain plus concern that the nation will fail to meet its debt obligations drew global investors away from equities and into the relative safety of U.S. government-backed bonds — including mortgage-backed bonds. This is a common investment pattern during times of economic uncertainty and one of the major reasons why mortgage rates have been so low, for so long.

If the scenario in Spain sounds similar to what transpired in Greece between mid-2010 and late-2011, that’s because it is. Mortgage rates in Pennsylvania may benefit in the medium-term.

Also helping rates last week was the March jobs report.

The U.S. government reported 120,000 net new jobs created in March, well short of the 200,000 figure that analysts expected. Market sold off sharply on the news, giving rate shoppers another chance to capture low rates.

This week, with the economic calendar light, look for Europe to dictate market action. Mortgage rates may move lower but there’s more room for rates to rise than to fall. Rates remain near all-time lows.

What’s Ahead For Mortgage Rates This Week : April 2, 2012

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Jobs growth can influence mortgage ratesMortgage markets improved last week on renewed concerns of a European debt default, and Federal Reserve rhetoric.

Conforming mortgage rates in Pennsylvania dropped on the news, one week after posting a 5-month high.

A major strike in Spain and growing unrest in Italy, both in opposition to recent austerity measures, have re-ignited fears that the Eurozone may lapse into recession.

These are similar beginnings as with last year’s events in Greece. The difference is that Spain and Italy represent a larger share of the Eurozone’s overall economy, and a debt default could trigger faster contagion.

Mortgage markets gained on the news in a bid of safe haven buying.

Bonds also gained as Federal Reserve Chairman Ben Bernanke clarified his position on the economy with respect to Fed-led stimulus. Summarized, he said that the Federal Reserve is inclined to keep its accommodative policies in place until the labor market is more fully recovered.

In addition, Chairman Bernanke alluded to making direct mortgage market intervention if U.S. economic growth were to stall in the near future.

The news helped push mortgage rates back below 4.000 percent last week, according to Freddie Mac’s weekly Primary Mortgage Market Survey. The average 30-year fixed rate mortgage rate fell to 3.99% for applicants willing to pay an accompanying 0.7 discount plus closing costs.

1 discount point is equal to one percent of your loan size.

This week’s mortgage market activity will be holiday-shortened so expect volatility — especially surrounding Friday’s March Non-Farm Payrolls report.

More commonly called “the jobs report”, Non-Farm Payrolls details national employment rates and gains or losses in the workforce size. Lately, what’s been good for jobs has been good for the economy so if the actual number of jobs created exceeds the 200,000 projected by economists, or if the Unemployment Rate drops off its current 8.3% reading, look for mortgage rates to rise.

In general, economic expansion is bad for mortgage rates throughout Phoenixville and the nation.

Other market-moving news this week includes Tuesday’s FOMC Minutes release and Thursday Jobless Claims data.  

Mortgage Rates Fall Back Below 4%

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Freddie Mac Weekly Mortgage Rates

After a brief run-up two weeks ago, mortgage rates are back below 4 percent. It’s good news for home buyers and mortgage rate shoppers of Collegeville because with lower mortgage rates come lower mortgage payments.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the national, average 30-year fixed rate mortgage rate fell to 3.99 percent this week from last week’s 4.08 percent.

Last week had marked the first time since December 2011 that the benchmark rate crossed north of 4 percent — a span of 16 weeks.

And, it wasn’t just rates that got cheaper this week — closing costs dropped, too.

Freddie Mac’s survey showed that the average number of discount points to accompany a 30-year fixed rate mortgage fell one-tenth of a percent this week to 0.7, where one discount point is equal to one percent of your loan size.

As a real-life example, a $200,000 mortgage with an accompanying 0.7 discount points would be subject to an additional $1,400 one-time closing cost. Last week, that cost was $1,600.

Note, though, that these are average mortgage rates for the nation. On a local level, rates may be higher or lower, and so may the accompanying number of discount points.

For example, in this week’s Freddie Mac survey, each U.S. region boasts its own “average rate” :

  • Northeast Region : 4.00% with 0.7 discount points
  • West Region : 3.94% with 0.9 discount points
  • Southeast Region : 4.01% with 0.8 discount points
  • North Central Region : 3.99% with 0.6 discount points
  • Southwest Region : 4.02% with 0.8 discount points

These rates are each well below the average rates of a year ago when the average 30-year fixed rate mortgage was 4.86%. 

Low mortgage rates can’t last forever so if you’ve been wondering whether now is a good time to buy a home or refinance one; or whether rising rates will harm your monthly budget, the answer may be yes. A weak economy held mortgage rates low last year. An improving economy should push rates higher this year.

Talk to your loan officer and review your home loan options. Looking ahead to spring and summer, mortgage rates appear poised to rise.