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September 30th, 2013

Mortgage rates fall back to lowest level in months

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

As expected, mortgage rates moved lower last week in the wake of the inaction by the Federal Reserve back on September 18. Last week’s decline was a little more than we expected — we thought the decline would be more of a multi-week affair, rather than as quickly as it occurred over the past seven business days — but markets move as they wish.

Mortgage rates now waiting on jobs report and debt ceiling

In the fresh economic data out last week, there was nothing to suggest that the economy is moving strongly one way or the other, although the next significant report is now on the horizon in the form of the employment report, due out this Friday.

Of course, there’s also the debt ceiling/budget showdown now playing in Congress which could have an effect on mortgage rates, too, but it’s hard to know exactly what might take place, when it will occur and how long it might last. A debt ceiling deal is likely to get done, even if today’s brinkmanship over the budget does lead to a temporary shutdown of the government.

For now, we’ll simply have to soothe ourselves with the lowest mortgage rates we’ve seen in a couple months.

Mortgage rates fall to lowest in months

HSH.com’s broad-market mortgage tracker — our weekly Fixed-Rate Mortgage Indicator — found that the overall average rate for a 30-year fixed-rate mortgage (conforming, non-conforming and jumbo) eased by 13 basis points (0.12 percent) to 4.52 percent, the lowest value since late June.

The overall average rate for a 15-year fixed-rate mortgage (conforming, non-conforming and jumbo) managed to shed 11 basis points (0.11 percent) from the previous week’s figure, sliding to 3.63 percent.

FHA-backed 30-year fixed-rate mortgages improved by 14 basis points, dropping back to an average of 4.13 percent.

The 5/1 Hybrid ARM gave up another 11 hundredths of a percentage point (0.11 percent) halting its slide at 3.27 percent.

New-home sales hit by higher mortgage rates

Arguably, one of the reasons the Fed stayed the course is that it wants more time to see if the sizable bump in mortgage rates has derailed the housing market.

Early evidence from July came in the form of a plummet in new home sales, which featured a 13.4 percent drop for the month. Following that up, last week was the report covering August, and truth be told, although the number was improved compared to July, it was still pretty soft.

9.30.13 30FRMvsNHS

All told, sales of new homes are still up substantially over last year, keeping builders optimistic and economically engaged, but we still remain a fairly long distance from normal, and firmer interest rates aren’t helping us get there any more quickly.

Mortgage rates should level off

If the present overall pattern for economic data holds, all will be probably lukewarm in some way or another, and mortgage rates will level off, with the most likely move being down by a couple of basis points (warmer data could reverse this, however).

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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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