blog.hsh.com

As we predicted, mortgage rates firmed up last week, marching upward from their record lows seen on December 1.

“As expected, mortgage rates edged higher [last] week. Some better economic news, some lingering glow from November’s employment report [on December 4], and light investor demand for new Treasury debt boosted rates a little. We may see some hangover from that [this] week, if the relationship between the 10-year Treasury yield and average mortgage rates holds true.”

“For [last] week, HSH.com’s FRMI, our overall average for mortgage rates (including conforming, jumbo and agency jumbo), increased by five basis points (0.05%), closing the survey period at 5.29%. Thirty-year fixed-rate Jumbo loans rose less than conforming did, a move of five basis points compared to the eight seen for agency-backed loans. Meanwhile, the overall average for 5/1 Hybrid ARMs also saw a five-basis point upward move, closing the survey week at 4.61%.”

On Tuesday of last week, the 30-year Conforming interest rate was among the lowest we’ve seen in several decades, according to the latest issue of HSH’s Market Trends Newsletter. By Friday, the rate did rise to 5.06%, yet, that’s still an incredibly-low rate for anyone looking to purchase or refinance.

Dangers in Playing the Mortgage Rate Waiting Game

Mortgage rates are on a roll. Rates fell last week to their lowest levels seen all year. According to the latest issue of HSH’s Market Trends Newsletter, “Mortgage Rates Downshift, Match Year’s Low,” the conforming 30-year fixed rate dipped below the 5% mark.

“Although one might have thought that everyone knew that a sluggish economic recovery is on tap, a reiteration of this by Federal Reserve Chairman Ben Bernanke [last] Monday seemed to push some investors out of equities and back into bonds, driving yields and mortgage rates downward.”

Over the past year or so, the daunting task facing potential homebuyers hasn’t been locking in on a low mortgage rate, it has been whether or not you can qualify for financing amidst the strict lending conditions. The last issue of HSH’s Market Trends Newsletter, “Rates Ease Back Slightly,” compares it to “a group of penniless children staring in the candy-store window: You can look, but you can’t buy.”

“Mortgage rates eased back a little bit [last] week. Although the price of money is quite attractive, the availability of it remains difficult for many borrowers.”

Mortgage rates seem to be one of the more consistent and stable economic factors that we’re following these days. According to the latest issue of HSH’s Market Trends Newsletter, “Rates Still ‘Exceptionally Low‘,” the conforming 30-year fixed rate closed our survey week at 5.13% at a quarter-point fee level.

“The Federal Reserve re-committed to keeping the short-term interest rates it controls at ‘exceptionally low’ levels for an undefined ‘extended period of time.’ Along with the extension and expansion of the homebuyer tax credit, these important supports should help the housing market to continue to stabilize, and may even serve to promote some refinancing activity, too.”

Unfortunately we can’t predict the future, but we can sure try and forecast it. Six times a year, HSH releases a two-month forecast for mortgage rates in which we rely on our 30 years of industry experience to anticipate where and how the markets will move.

Rates fell further than we thought over the last two months. While we accurately predicted the gap of the spread between high and low, borrowers who accessed credit were thankful we overbid:

Despite a week filled with inconsistent economic data, mortgage rates managed to fall last week to spring-time levels. According to the latest issue of HSH’s Market Trends Newsletter, “Rates Leg Down a Little,” 30-year conforming rates dropped to their “their lowest average rate since the late March to late May period.”

“With September now behind us, stock markets started October in a fashion similar to other Octobers: they sold off to some degree. After a pretty good third quarter’s profits were booked, at least some of those gains from equity sales have been stashed back into Treasuries, driving yields down. This is turn is pressuring mortgage rates down to the lows of earlier this year.”

According to the latest issue of HSH’s Market Trends Newsletter, “Firmer Rates, Barely,” mortgage rates are hovering in the middle of the range they have been in for some time now. Since economic conditions are neither completely bleak or steadily improving, rates are “waiting to see where [they] go from here.”

“Subtle signs of economic improvement are gaining in number and frequency, but it’s all too easy to confuse a move back toward flatline growth as actual recovery, or to conclude that a rising trend is wholly sustainable. While we’re encouraged by the momentum away from emergency panic levels, risks to any nascent economic recovery remain, and real improvement is still in our future.”

According to the latest issue of HSH’s Market Trends Newsletter, “Rate Fall, then Firm,” the Fed’s sponge-like actions, absorbing the excess supply of mortgage-backed securities and Treasuries when and if it forms, has served to keep interest rates low.

“The Fed is providing support to various financial markets, including the mortgage market, with purchases of MBS and Treasury debt alike. Earlier this year, there were rumors pervading the markets that the Fed would engineer 4.5% 30-year fixed-rate mortgages; we never put any stock in them. With the release of the minutes, they revealed for the first time that there is no specific target for rates in mind, but rather the Fed seems to be acting as a sponge to absorb excess supply in those markets when and if it forms, serving to keep interest rates low. The minutes noted that ‘The asset purchase programs were intended to support economic activity by improving market functioning and reducing interest rates on mortgage loans and other long-term credit to households and businesses relative to what they otherwise would have been. But the Committee had not set specific objectives for longer-term interest rates…’. At the same time, they also revealed a steadfast hold to the objective of the established program of measured buying of these assets, and that there would be no knee-jerk adjustments to try to address short-term fluctuations in market interest rates.”

At the end of business on Monday the Conforming 30-year fixed rate was 5.22%, the lowest daily average since May 27. Tuesday’s rate ended at 5.28%, according to HSH.com.

Click here to read our prediction of where the Conforming rate is headed for the rest of the year.