Mortgage rates at monthly lows despite government shutdownby Tim Manni
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.
Two weeks ago, we were still hopeful that the partial shutdown of the federal government would be averted in a last-minute bit of sanity and compromise, but we instead got more of the same intransigence on both sides of the aisle which has produced gridlock.
Shutdown’s impact on mortgages
The mortgage market isn’t closed – not yet, anyway – but the works will continue to be more gummed up by the day, as inbound requests for documentation from the IRS in the form of 4506-T forms will pile higher and higher until the impasse comes to an end. That’s a shame, since mortgage rates have fallen to levels last seen in early summer, and borrowers are hoping to respond by buying homes and refinancing their mortgages. They may still, but the process to get a loan closed may drag on even longer than it already takes.
Mortgage rates fall to early-summer lows
HSH.com’s weekly Fixed-Rate Mortgage Indicator found that the overall average rate for a 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) dropped back by another nine basis points (0.09 percent) to 4.43 percent, the FRMI’s lowest value since late June.
The overall average rate for a 15-year fixed-rate mortgages (conforming, non-conforming and jumbos) managed to shed seven basis points (0.07 percent) from the previous week’s figure, sliding to 3.56 percent.
FHA-backed 30-year fixed-rate mortgages improved by nine basis points, dropping back to an average 4.04 percent.
The overall 5/1 Hybrid ARM gave up seven hundredths of a percentage point (0.07 percent) stopping on the way down at 3.20 percent.
Shutdown could soon gum up the works
Despite the complete shutdown of the wholly government-backed USDA program, the immediate impact on mortgage borrowers is still only slight.
However, as time passes, the mucilage in the gears of the mortgage machine will begin to gel, and delays in closing loans and backlogs of deals will become the order of the day. We still have some time before that becomes reality, so for now, let’s hope for a quick end to the impasse in Washington.
The drop in mortgage rates due to the surprise inaction by the Fed a couple of weeks ago seems to have largely run its course. On a daily basis, mortgage rates have been pretty flat for the last five or six business days, and it seems mostly likely we will plateau around these levels until more clarity about the Fed’s intentions (or some about the economy) become available, whenever that might be.
Call this week a wash for mortgage rates, with a slight move upward of a couple basis points.