Mortgage rates still wandering, just not by muchby Tim Manni
Last week, we described mortgage rates throughout the month of January as erratic. Even though mortgage rates have been up and down over the course of the last four weeks or so, the range in which rates have bounced around in has been pretty narrow:
After a fall run-up which saw a 60+ basis point jump in the conforming 30-year fixed rate over an eight week period, the benchmark mortgage product has held in a 10-basis-point gap over the past seven weeks and seems likely to hang there for a while longer.
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 single basis point, landing at an average 5.12% for the final week of January. FHA-backed 30-year FRMs, a considerable and crucial part of the first-time homebuying market, moved up by two basis points (.02) to finish the week at 4.77%. Borrowers looking for an alternative to the benchmark 30-year FRM might consider a 5/1 Hybrid ARM, which is available at an attractive 3.80%, down two basis points from [the week ending 01/21/11].
Overall, we see that an upward trend is in the cards for mortgage rates, mainly fostered by improving economic conditions. Despite seeing several improvements across the board, the level of the economic upswing hasn’t been enough to propel mortgage rates consistently upward:
As the economy slowly heals, boosted to a degree by payroll-tax changes and government programs, interest rates in general and mortgage rates specifically may find some reason to begin an upward march. For the moment, the fragile and uneven state of the recovery should serve to keep things fairly stable, at least until mounting signs of entrenching growth begin to show. They aren’t apparent as of yet.
Mortgage market: Still seeking clarity
Since the housing market crashed, there has been a widespread sense of uncertainty and market distortion. There have been tax credits, federal programs and regulatory reform. Even as most of those programs have either come to an end or we have gained a better understanding of how they will affect the markets, we still haven’t gotten word on how Fannie and Freddie will shape up:
After last fall’s changeable market — preparing for the Fed’s program and trying to understand how it fits into the broader economic puzzle — the mortgage market has been waiting for some clarity on what may become of Fannie Mae and Freddie Mac. A study from the Treasury Department was due at month’s end but was kicked back a couple of weeks. Regardless of any recommendations, it is sure to spark a contentious debate about the future of mortgages and housing finance in this country for some time to come. Depending upon the direction of the discussion and who is doing the talking at any given moment, there may be some or no discernable effect on mortgage rates. What will have an effect are the new Fannie LLPA pricing adjustments we talked about in last week’s Market Trends, which are already beginning to seep into the market for loans delivered to Fannie come April 1.