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April 29th, 2013

Lowest mortgage rates in 2013

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Below is an excerpt from of our latest Market Trends newsletter, Keith Gumbinger’s latest examination of the economic conditions that influenced mortgage rates. Sign up to receive the Market Trends in your inbox Friday evening.

The effects of weak economic headwinds do produce some tangible benefits. There may be silver linings to be seen among the clouds of economic slowness, at least for some.

A slower world economy has a lessened demand for fuel, so gasoline and petroleum prices have fallen. That helps lessen inflation, which in turn helps keep interest rates low. Lower gasoline and other input prices put more spendable dollars in consumer pockets, which can provide considerable economic benefit, and lower interest rates can help borrowers to buy homes more easily or refinance to good effect.

Mortgage rates set records

HSH.com’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator–found that the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbo) eased by a single basis point (0.03 percent) to 3.65 percent for the week ending April 26, a new low for 2013.

The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbo) dropped by four basis points (0.04 percent) to 2.89 percent for the week, a new all-time low.

FHA-backed 30-year fixed-rate mortgages followed along with a decline of just one basis points (0.01 percent), falling to an average rate of 3.28 percent, accompanied by a one-hundredth percentage point slip in the overall average rate for 5/1 Hybrid ARMs to an average 2.60 percent for the week. a new low water-mark for the most popular ARM.

Mortgage rates affect home sales

4.29.13 HSvs30FRMWhile there is no doubt that the refinance market is sensitive to any bump in interest rates, it should be noted that home sales seem to be, too. A late-winter rise in mortgage rates certainly wasn’t enough to cause a complete stall in sales or refinances, but it was enough to slow the speed of the recovery in home buying.

Sales of existing homes leveled off in March, declining by 0.6 percent. In fact, after a string of more or less regular gains, sales have been holding at roughly this level for the past five months. Although available inventory on the market did expand slightly to 4.7 months of supply, this is still a number well below the six months of supply which is considered normal.

While a lack of supply seemed to be hurting sales growth, tight inventories are fostering higher home prices. The 11.8 percent gain in prices when compared against March 2012 continued a string of double (or near double) digit gains in each of the last six months.

Sales of new homes did manage a slight rise in March, posting a 1.5 percent increase over the February figure. As with existing homes, inventory levels remain tight.

What will happen to mortgage rates this week?

For mortgage rates? Their little peak-to-trough may not be completely over, but the recent decline in mortgage rates should help foster some additional home buying and refinancing demand, and that alone should be enough to keep rates from falling very much.

From here, we would need some truly bleak reports–both domestic and foreign–to press rates much lower, or a collapse in demand for mortgage credit. More likely, we are back to a place where, for the most part, the only way to go is up.

Not this week, though, or at least not much, anyway. Although April’s economic news should be somewhat better than March’s, mortgage rates are mostly likely to wobble around these levels, possibly adding a couple of basis points at most.

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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.

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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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