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January 24th, 2011

Mortgage rates have become a wait and see scenario

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Mortgage rates have been pretty erratic throughout the month of January. Last week, mortgage rates mostly made up for the subtle decline we saw the week before:

HSH.com’s overall mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — found that the overall average rate for 30-year fixed-rate mortgages increased by a mild six basis points, landing at an average 5.11% during a holiday-shortened week. FHA-backed 30-year FRMs, a considerable and crucial part of the first-time homebuying market, ticked just three basis points upward to 4.75% for the week. Borrowers looking to alternatives to the benchmark 30-year FRM might consider a 5/1 Hybrid ARM, which is available at an attractive 3.82%, up just a lone basis point from the week prior. The gap between long-term fixed rates and the most common hybrid ARM should makes them at least a consideration for homebuyers and refinancers with short time horizons. HSH.com’s FRMI and other public data series includes rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so cover much of the mortgage-borrowing public.

A lack of clear direction

So far this year, mortgage rates have been locked in a bob-and-weave pattern, an up-and-down, back-and-forth motion. One the main reasons for this is the economy’s lack of clear direction:

Mortgage rates took back last week’s little decline, as what seems to be a lack of a clear direction for the economy has helps them to find a plateau. Unlike the last quarter of last year, when economic improvement was trending higher, it may just be that we’ve gotten to a “wait and see what develops” kind of state.

Positive sign for 2011?

As we mentioned last week, December’s existing-home sales showed quite an improvement last month, and if the sales trend continues into the winter, we should be better suited to handle the influx of housing inventory that will surely be supplied by continued foreclosures:

HSvs30FRM

As we move away from distortions in the market created by on-again, off-again tax incentives, we should be able to again discern true demand levels for housing. With low interest rates still in place and affordability at very high levels, existing home sales managed to jump to an annualized rate of 5.28 million in December, the highest such figure in more than six months. The kick higher in sales came even as interest rates were firmer than many periods earlier in the year, and also drained some inventory out of the market, drawing it down to 8.1 months of available homes at the present sales pace. More inventory is slated to hit the market in 2011 as foreclosures continue unabated. Still, that there is growing demand for homes as the economy has shown signs of life does portend well for the market in 2011, and increasing employment opportunities during the year may even forestall or even cancel some expected foreclosures.

Should the economy improve enough for that to happen, it would be truly good news.

Looking for a more long-term forecast for mortgage rates? If so, be sure to read our 2011 forecast for mortgage rates and the mortgage market.
CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “Mortgage rates wandering around.”

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.

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2 Responses to “Mortgage rates have become a wait and see scenario”

  1. Tweets that mention Mortgage rates have become a wait and see scenario | HSH Financial News Blog -- Topsy.com Says: January 24th, 2011 at 2:54 pm

    [...] This post was mentioned on Twitter by HSH Associates and Boise Home Loans, Santiago Peters. Santiago Peters said: Mortgage rates have become a wait and see scenario | HSH Financial … http://bit.ly/h6ire3 [...]

  2. Dirtha Says: January 24th, 2011 at 4:40 pm

    There needs to be a disclosure on the APR of the rates quote and the criteria necessary to obtain the pricing… example FHA min credit 640-660 requires .75% risk adjustment to pricing and or 5% down. The criteria required for rates quoted is no where on the site.

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About the HSH Blog

HSH.com'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.

Our bloggers:

Tim Manni

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

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