Mortgage Rates Remain Low Despite Absence of Market Supportby Tim Manni
Mortgage Rates remained low last week despite two major housing supports being gone from the market. The homebuyer tax credit — for both first-time and trade-up buyers — has ended, about one month after the Fed’s support for low mortgage rates expired:
The last of the extraordinary props for the nation’s mortgage and home sales markets have come to an end. Just four weeks after the Federal Reserve stepped away from the mortgage market comes the end of first-time and trade-up homebuyer tax credits. Meanwhile, the effort to prop up failing homeowners though modification and other initiatives enjoys a continuing commitment.
While the Fed program of buying up $1.25 trillion of Mortgage-Backed Securities was easily the more important of the two — after all, both homebuyers and homeowners can enjoy low mortgage rates — but the tax credit has arguably been a key element in fostering demand for home purchases, and spurring consumers to act. We won’t know the actual results of the program for some time, until all tax filings for 2009 as well as for 2010 have been completed, but the home-sale indicators seem to suggest that there has been positive, measurable effect on weak housing markets.
Potential homebuyers who missed out on the tax credit still have an opportunity to cash-in on great rates:
Mortgage rates have remained low since the Fed exited the stage, and have trended lower over the last couple of weeks as Greece’s (and perhaps Spain’s) economic issues have produced a run into the safe-haven investment of US-backed debt.
HSH’s market-spanning Fixed-Rate Mortgage Indicator (FRMI) remained unchanged [last] week at an average 5.36%. The FRMI includes rates for conforming, jumbo and the GSE’s “high-limit” conforming products in its calculation and so covers a wide swath of the market. The most popular alternative to the traditional fixed-rate mortgage — a Hybrid 5/1 ARM — sported an average interest rate of 4.41% this week, down just a single basis point from[the previous] week’s 4.42%.
What’s in store for this week?
The collective tenor of [economic] reports over the last month or so has generally been mixed-to-better, and we see no reason why this bunch won’t be, too. That said, how long can mortgage rates resist the upward pull of a gently firming economy? No one knows for sure, but we think that since rates resisted the downward pull of global trouble this week that they simply cannot go much lower… and probably are due for a little increase [this] week as a result.
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