“Home Loan Rates Drift Down a Little”by Tim Manni
According to the latest issue of HSH’s Market Trends Newsletter, “Home Loan Rates Drift Down a Little,” the anticipated economic recovery may bring inflation and higher rates along with it.
“Of course, that presupposes that the Federal Reserve will no longer be the largest component of support for the mortgage market, and that private market interests will be again asserting more influence into the price of credit. That day will come, but not yet.”
“This week, the overall average for residential fixed-rate mortgages eased by four basis points. HSH’s Fixed-Rate Mortgage Indicator — inclusive of conforming, jumbo and “high-limit” conforming loans — dipped back to 5.43%. The FRMI’s 5/1 Hybrid counterpart also shed four basis points to land at 5.15% for the period. Conforming 30-year FRMs moved down a like amount, again landing at just under 5%, while “true” jumbo mortgages increased by a single basis point.”
“In addition to massive amounts of new “supply” of government bonds, the slightly improving economic picture is producing a bit of an increase in interest rates. After flirting with a 3% yield on a number of occasions, the yield on the 10-year Treasury blew right on by it this week, running as “high” as 3.16% on Thursday from about 2.95% on Monday. Of course, even with the increase, yields remain extraordinarily low. It wasn’t all that long ago that the Fed announced its program to buy Treasuries, causing some speculation that they would drive interest rates even lower (and, in fact, we saw a 50-basis-point decline in the 10-year yield in the space of a couple of hours after the announcement). However, we believed that the Fed would be buying bonds not to lower interest rates, but rather to temper the kinds of increases that a glut of supply would bring. That seems to be the case so far.”
“Click here to continue reading “Home Loan Rates Drift Down a Little.” HSH’s free weekly Market Trends Newsletter, an in-depth analysis of various financial markets of the week prior, is published every Monday. Email subscribers receive it in your inbox by Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.”