Mortgage market: Especially quiet this holiday seasonby Tim Manni
It’s not at all unusual to see the mortgage market slow down during the holiday season. Yet this year, the market has become especially quiet due to the presence of rising mortgage rates.
You may be thinking that this latest uptick in mortgage rates is going to cap off an exceptionally-poor year for the mortgage market, but that’s not exactly true. Record-low mortgage rates in 2010 allowed for a substantial number of homeowners to refinance their mortgages and lower their monthly payments:
Few would consider this to have been anywhere near a banner year for the mortgage market, but it has done pretty well overall. While home sales remain moribund at best, record-low interest rates fostered hundreds of thousands (perhaps millions) of refinances, papering over what would have been a very slow year indeed. Refinances have been important to both lender profits and improvements in household balance sheets, and are no doubt contributing to the gains in retail and auto sales as the year progressed.
That organic stimulus should continue to some degree, lagged effects being what what are. However, the rise in rates means fewer and fewer new beneficiaries, at least for the moment.
Mortgage rates increased once again last week (emphasis added):
HSH.com’s overall mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — found that the average rate for 30-year fixed-rate mortgages moved another nine basis points higher (.09%), ending HSH.com’s national survey at 4.95%, a twenty-week high. For low-down payment homebuyers or refinancers with only a slight equity position, FHA-backed loans are available at an average rate of 4.65%, while the overall average rate for 5/1 Hybrid ARMs rose seven basis points to 3.73% for the week. HSH.com’s public mortgage interest rate data series include rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so covers much of the mortgage-borrowing public.
The good news is that mortgage rates may have leveled off, and may actually improve in the coming weeks:
Despite [last] week’s rise, mortgage rates do seem to have leveled off. Barring any blockbuster economic data, there is a good chance that we have peaked, give or take a few basis points. If we have, and if history is any guide, we might see some slight improvement in rates over the next couple of weeks.
Stronger [economic] news could presage firmer interest rates, but since they have already firmed they probably stand fairly steady by [this] week’s end.
CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “Rising Rates Quiets Mortgage Market.”
HSH.com’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.