Mortgage Rates See Minor Increaseby Tim Manni
For the first week in a while, mortgage rates managed to stop falling. The measly two-basis-point increase was nothing in the way of a difference maker for potential borrowers, and furthermore, there really isn’t much in the way of an economic indicator that is likely to pull rates too much higher in the weeks ahead:
Each week for some 30 years, HSH has produced an overall mortgage monitor — our our Fixed-Rate Mortgage Indicator (FRMI). The FRMI includes rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so covers much of the mortgage-borrowing public. [Last] week, the FRMI remained in record-low territory even though it lifted by two basis points (.02%) to 4.92%. For borrowers for whom a long-term fixed-rate mortgage doesn’t fit the bill, the next-most popular choice is the hybrid 5/1 ARM, which finished the survey week at 3.92%.
Until that better economic climate shows, we’ll continue to have low mortgage rates and high unemployment, and continue in this stagnant holding pattern.
The present state of the housing and mortgage markets, are, simply stated, not good. Mortgage rates are at record lows, yet very few borrowers have been able to take advantage of them. Unemployment and negative equity continue to mar a market where housing preservation efforts, up to this point, have done little to prop up such an important facet of this country’s overall economy.
So what does the future hold for the housing and mortgage markets?
On a longer-range note, the Treasury announced it would hold a one-day conference on August 17 to brainstorm the future of the housing and mortgage markets. By January 2011 they will have some working concepts for reforming Fannie Mae and Freddie Mac to present to the Congress. A whole day and perhaps five months to unravel the Gordian knot which is Fannie, Freddie and the whole of government housing policy isn’t nearly enough time to properly reform a system which was built over decades, and there is a considerable danger in doing it wrong or too quickly. The regulatory reform train is gathering speed and uncertain times lie ahead — and uncertainty is, as we have been seeing, not conducive to improving markets.
As for this week, we don’t expect to see too many bright spots that will cause mortgage rates to “do anything different than they have in recent weeks.” Expect to see rates decline mildly.
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