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February 10th, 2014

Economic strain proves fruitful for mortgage borrowers



The year of rising mortgage rates, 2014, has been anything but, at least so far.

Several economic reports out last week have echoed the sentiment we first saw in the December employment report. December’s job figures took everyone by surprise, proving to be the first serious indication that the economic recovery was not on as solid of a footing as we all thought.

Combine the weaker reports in the U.S. with a Federal Reserve who has continued to reduce their market supports, not to mention economic weakness abroad, and the result has been investors the world over seeking shelter within the safe-haven of U.S. Treasuries.

While this combination of events has caused mortgage rates to fall here in the U.S., Keith Gumbinger, vice president of HSH.com, cautioned that there is still only so much room for mortgage rates to fall.

“In this kind of environment, and with so many challenges evident, it is very difficult for interest rates to firm, but absent true calamity, there are limits on how far they can fall.”

Mortgage rates fall to monthly lows

According to the latest figures from HSH.com, mortgage rates of all stripes declined last week:

  • 30-year: The overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) declined by seven basis points (0.07 percent) to land at 4.38 percent, its lowest level since the week ending Nov. 22, 2013.
  • 15-year: The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbos) fell by five basis points (0.05 percent) to slide to 3.53 percent.
  • FHA: FHA-backed 30-year fixed-rate mortgages declined by seven basis points to land at 4 percent.
  • ARMs: The overall 5/1 Hybrid ARM rate declined by four basis points (0.04 percent) to an attractive rate of 3.09 percent.

Economy still struggling

Jobs: January’s figure of 113,000 new hires offered little relief after December’s figure was barely revised upward to just 75,000 new jobs.  “These last two reports are a considerable contrast to the the 274,000 jobs created in November and represent a breather in hiring, if not an outright stall,” said Gumbinger.

Manufacturing: Yet another symbol of the slowdown, manufacturing activity saw a sizable decline last month. Production, new orders and hiring plans all fell, according to the latest report from the Institute for Supply Management.

Reversal for mortgage rates this week?

The lack of economic growth here and abroad has allowed mortgage rates to fall for five straight weeks, adding up to nearly a quarter-percent decline since the start of 2014.

On Friday, Gumbinger noted that the declining-mortgage-rates ride may have come to an end, at least in the short term. “With investors moving funds to riskier propositions, underlying interest rates which influence mortgages not only stopped declining but have nudged higher over the last few days. Based on that, it would seem that the nice little fall in mortgage rates is coming to an end, at least for now. We expect a little firming for rates [this] week …”

To read more about the economic reports from last week and their influence on mortgage rates moving forward, be sure to read the latest version of HSH.com’s Market Trends newsletter.

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2 Responses to “Economic strain proves fruitful for mortgage borrowers”

  1. Martha Gonzales Says: February 16th, 2014 at 3:45 pm

    I’m not that much into mortgages. However, a question cropped up in my mind – Do fall of 4 to 7 basis points markedly change the payment amount of borrowers?

  2. Tim Manni Says: February 19th, 2014 at 3:10 pm

    Hey Martha, thanks for commenting. The change of 4 to 7 basis points (0.04 and 0.07 percent) does not change the monthly payment by a lot, but by some. On a $200,000 home, at rates of 4 percent and 4.07 percent, the monthly change is about $8. However, with that lower rate you save nearly $3,000 in total interest costs.

    Thanks for commenting.

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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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