January 11th, 2010

Mortgage Rates Stabilize, No Longer Rising



Mortgage rates stabilized last week, ending their multiple-week run of increases, according to the latest issue of HSH’s Market Trends Newsletter (emphasis added):

The turn of the calendar put an end to a weeks-long rise in mortgage rates. As the holiday period falls behind us and we return to more normal market activity, it’s not unusual to see a change in direction for mortgage rates.

The overall average for 30-year fixed-rate mortgages tracked by’s FRMI saw the first week of the new year close with an average of 5.54%, a decline of five basis points from the end of 2009 for the overall indicator of the costs of conforming, jumbo and expanded conforming mortgage loans. The FRMI’s Hybrid 5/1 ARM companion shed just four basis points, starting the year at an average 4.81%. Conforming mortgage rates are higher than their recent bottoms, but — at just a shade under 5.25% — remain quite comfortable.

In order for mortgage rates to remain within the range in which they have fluctuated in over the last year or so, either the Fed will have to extended their mortgage-backed securities (MBS) purchase program, or the private market will have to step up and absorb billions in MBS each week (emphasis added):

As we wander into 2010, perhaps the biggest factor is what the Fed decides to do with all its various support programs and how they will affect the functioning of markets. In that regard, we were a little surprised that the minutes from the mid-December Fed meeting revealed some dissent about how or when to wind down the program for purchasing Mortgage-Backed Securities (MBS). That MBS program is the key factor keeping conforming interest rates at near-record low levels, and is technically slated to expire in March (and that date having been already extended from a 12/31/09 termination).

While it’s indisputable that the Fed’s involvement has produced benefits, what is not as clear is whether or not the private market will be ready to absorb as much as $15 to $20 billion of new MBS per week. If not, too much supply amid too little demand will cause a spike in interest rates, and that will imperil the housing market recovery.

Want to know where rates are headed in 2010?

Interest rates have firmed from late-fall bottoms, but there’s insufficient economic heat to suggest that they can push too much higher. In that regard, we do seem to be establishing a new range, with a higher “bottom” than the upper four-percent one we’ve seen at times. Better news will serve to firm rates, or keep them steady.

If you were out last week, you might have missed the announcement that our 2010 Outlook for Mortgage Markets and Rates is out. It covers what we think are the ten most important considerations for the market this year.

Our latest two-month forecast offers our predictions for the immediate future.

Click here to continue reading “Mortgage Rates Stabilize, Ease Slightly.” HSH’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox 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.

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2 Responses to “Mortgage Rates Stabilize, No Longer Rising”

  1. Visionary Realty News by Visionary Agents w/ American Home Hunters » Fed’s Rosengren: Loan Rates Set to Rise in Spring Says: January 11th, 2010 at 10:06 pm

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About the HSH Blog's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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