Tag Archives: Federal Reserve

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

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Retail Sales 2009-2011Mortgage markets improved last week, pushing mortgage rates in Pennsylvania lower for the second straight week. Conforming fixed and adjustable-rate mortgage cut new, all-time lows, and FHA mortgage rates did the same.

In a holiday-shortened trading week, stronger-than-expected U.S. economic data and ongoing weakness within Europe drove investors into the U.S. mortgage-backed bond market. When demand for bonds is high, mortgage rates improve.

The Refi Boom continues.

Since beginning their descent last February, mortgage rates have shed 114 basis points en route to reaching 3.91%, the current, “average”, 30-year fixed rate mortgage rate nationwide and a new all-time low, according to Freddie Mac and its mortgage market survey. If you’re among today’s home buyers or would-be refinancers, on a $200,000 mortgage, the 1.14% rate drop represents a monthly mortgage payment savings of $135 — $1,623 per year.

Larger loans save more, smaller loans save less.

This week, with little economic news set for release, mortgage rates are expected to take their cue from the 8 Federal Reserve members scheduled to speak in public, and from whatever news may bubble up from the Eurozone.

The Federal Reserve said it will communicate its vision for the U.S. economic more openly and more often so Wall Street will be watching the Fed members’ speeches this week, in search of clues about the Fed’s 2012 roadmap.

For example, there has been speculation that a new round of stimulus would be introduced at the Fed’s next meeting later this month. If, after listening to this week’s speeches, investors sense it will happen, mortgage rates may be susceptible to an increase in Collegeville and everywhere else.

We’ll also be watching the Retail Sales report this week, due Thursday. Retail Sales are a reflection on consumer spending and consumer spending accounts for roughly 70% of the U.S. economy. If Retail Sales make gains, it may spark stock market gains at the expense of mortgage bonds.

This, too, would result in higher mortgage rates.

You can’t time the mortgage market, but with mortgage rates this low, it’s hard to go wrong. Talk with your loan officer to get a live rate quote.

What’s Ahead For Mortgage Rates This Week : December 12, 2011

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Federal Reserve meets this weekMortgage markets were mostly unchanged for the 6th consecutive week last week as Wall Street’s uncertainty regarding the future of U.S. and global economies remain.

Mortgage bonds made gains made through the early part of the week, which caused mortgage rates in Pennsylvania to drop Monday through Wednesday afternoon. Those gains were erased, however, as 23 of 27 Euro leaders reached agreement on fiscal coordination and budget planning, sparking optimism for the future of the Eurozone, in general.

Mortgage rates rose Thursday and Friday.

This week, the momentum may continue. The main story we’ll be watching is the Federal Open Market Committee’s Tuesday meeting — its 8th scheduled meeting of the year and its last until 2012. 

When the Fed meets, mortgage rates are often volatile.

At its meeting, the FOMC is expected to vote the Fed Funds Rate unchanged within its current range near zero percent. However, it won’t be the Fed’s vote on the Fed Funds Rate that changes markets. Wall Street is keyed in to two other elements, instead.

The first element is the verbiage of the FOMC’s press release to markets. Issued upon adjournment, the FOMC’s press release identifies strengths and weaknesses in the U.S. economy, and offers an outlook for the future plus potential threats. The “tone” of the press release can change how mortgage bonds trade.

If the Fed describes an economy in recovery with few threat to growth, mortgage rates are likely to rise post-FOMC. By contrast, if the Fed says the economy has slowed, mortgage rates should fall.

The second element on which Wall Street is focused is the likelihood of new, Fed-led economic stimulus. Should the Federal Reserve modify existing support programs, or introduce new ones, mortgage rates are sure to shift. Unfortunately, we can’t know in which direction — it will depend on the size of the program and its expected impact on the U.S. economy.

The Fed adjourns Tuesday at 2:15 PM ET.

Beyond the Fed, there is other rate-moving news, too, including Tuesday’s Retail Sales report, Thursday’s Producer Price Index, and Friday’s Consumer Price Index. Each has the capacity to change mortgage rates throughout Collegeville so if you’re floating a mortgage rate, it may be a good time to lock one in. 

Freddie Mac reports the average 30-year fixed rate mortgage at 3.99% with 0.7 discount points, plus closing costs.

What’s Ahead For Mortgage Rates This Week : December 5, 2011

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Non-farm payrolls Dec 2009 - Nov 2011Mortgage markets made little change last week for the fifth time in as many weeks.

As Wall Street watched both the Eurozone and the U.S. regain their respective footing, expectations for a new Fed-led stimulus increased, which prevented mortgage rates from rising.

According to Freddie Mac, the average 30-year fixed rate conforming mortgage rose just 2 basis points last week to 4.00% nationwide with an accompanying 0.7 discount points. 

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

For every $100,000 borrowed at 4.00 percent, therefore, today’s Pennsylvania mortgage applicant should expect to pay $700 in “points”. Mortgage rates for “zero-point loans” are higher than Freddie Mac’s published, average value.

This week, with few economic releases set for release, last week’s big stories should carry over into the current one — the biggest of which was a worldwide, coordinated central bank effort to increase system liquidity.

The European Central Bank, Bank of England and U.S. Federal Reserve were joined by the central banks of Japan, Canada and Switzerland in the effort. Stock markets rallied on the news.

Another of last week’s big stories was the sharp drop in the U.S. Unemployment Rate.

After hovering near nine percent since April, the Unemployment Rate broke out of range, dropping to to 8.6% in November. This is the lowest national Unemployment Rate since March 2009, a milestone achieved via the combination of new jobs created (+192,000 in November with revisions) plus a smaller U.S. workforce.

The U.S. economy has added 1.9 million jobs in the last 14 months.

Lastly, last week’s New Home Sales and Pending Home Sales Index releases support the growing belief that the U.S. housing market is in recovery. Both reports showed strong growth for October, corroborating what home builders have been saying — the housing market is improving and buyer ranks are growing.

Home supplies are lower in many U.S. markets.

This week, rate shoppers in Collegeville should be on alert. Market momentum changes quickly, and rates are currently anchored by the expectation of new Federal Reserve stimulus. The Fed meets December 13, 2011. As that date approaches, expectations could change, causing rates to rise.

Mortgage rates remain near all-time lows. It’s a good time to lock a rate with your lender.

Banks Resume Tightening Mortgage Guidelines

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Mortgage guidelines get tougher

As part of its quarterly survey to member banks nationwide, the Federal Reserve asked senior loan officers whether last quarter’s “prime” residential mortgage guidelines have tightened, loosened, or remained as-is.

A “prime” borrower is defined as one with a well-documented, high-performance credit history; with low debt-to-income ratios; and who chooses to finance a home via a traditional fixed-rate or adjustable-rate mortgage product.

After a 2-year easing cycle, the nation’s biggest banks report that they’ve reversed course, and are raising the bar on mortgage approvals.

For the period July-September 2010, 88% of responding loan officers admitted to tightening their prime guidelines, or leaving them “basically unchanged”.

If you’ve applied for a home loan of late, you’ve experienced this first-hand.

High delinquency rates and defaults since 2007 have caused the banks to rethink what they will lend, and to whom. As a result, today’s mortgage lenders scrutinize assets, incomes, and credit scores to make sure that nothing “slips by”.

For today’s home buyers and would-be refinancers, the mortgage approval process can be challenging as compared to how it looked just 18 months ago.

  • Minimum credit scores requirements are higher today
  • Downpayment/equity requirements are larger today
  • Debt-to-Income ratio requirements are more strict today

In other words, although mortgage rates are the lowest that they’ve been in history, fewer applicants can qualify. And, with more the housing market still in recovery, it’s likely that guidelines will tighten again in 2012.

Therefore, if you’re among the many people in King of Prussia wondering if it’s the right time to buy a home or refinance, consider that, although mortgage rates may fall, approval standards may not.

The best rate in the world won’t matter if you’re not eligible to lock it.