Mortgage rates continue to drop……..but

January 10, 2019January 12, 2019 ~ Fred Thomas, III ~ Leave a comment

Consumer mortgage rates have continued their decline and normally this would be great news for those financing the purchase of their home or refinancing their existing mortgage.

Low rates do not mean a thing if you can’t qualify!!!

MATTHEWS, NC – JANUARY 8: Brooks Troxler, owner of a small IT company called TroxTech, poses for a portrait at his office in a small office park in Matthews NC on January 8, 2019. Troxler is waiting for loan approval from the Small Business Association so he can close on a property that will allow him to expand his business. Because of the government shutdown, there are no federal workers at the SBA to approve his loan and his property deal is in jeopardy. (Photo by Logan Cyrus for The Washington Post via Getty Images)

Today Freddie Mac released its weekly rate survey. The benchmark thirty-year mortgage is now at 4.450%. The fifteen-year mortgage came in at 3.890%. The Freddie Mac rate survey is the industry standard which consumers and professionals used to gauge and monitor rate activity. The report data is compiled from a sample of Freddie Mac lenders across the nation.

Verifying income hampered

The dip in mortgage rates has resulted in a spike in mortgage applications. The trick for lenders processing those applications is being able to have the loans fund in light of the Government shutdown.

Some applicants who are tied to the shutdown have voluntarily pulled their applications and some have seen lenders pull their applications because it is hard to verify income that does not exist.

IRS affected by shutdown

Another effect is not being able to verify income using the standard 4506T process. The 4506T is a process initiated by lenders in wake of the 2008 financial crisis. It is an internal revenue form that most borrowers execute as part of the documents when making an application. It is used to match the income as reported on your federal income tax reporting. Unfortunately, due to the shutdown the IRS cannot verify income as reported.

The drop-in rates have helped to spur what was stalled real estate activity. While the shutdown is one metric affecting the economy, experts are pointing to the imposed tariffs and basic international uncertainty as further softening that may erode consumer confidence.

In the meantime, those whose income can be verified are more aggressive in taking advantage of the rate dip before the window closes.

Snapshot of this week’s rates:

30 year fixed rate – 4.450%
15 year fixed rate – 3.890%
5/1 Adjustable rate mortgage 3.83%

Mortgage rates jump to near 5%

October 11, 2018January 12, 2019 ~ Fred Thomas, III ~ Leave a comment

COVER PHOTO.  Traders work on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on October 10, 2018 in New York. - Wall Street stocks plunged Wednesday, with major indices losing more than three percent in a selloff prompted by the sudden jump in US interest rates. At the closing bell, the Dow Jones Industrial Average had lost 3.1 percent or 830 points to finish at 25,613.35, in the biggest fall since February. (Photo by Bryan R. Smith / AFP) (Photo credit should read BRYAN R. SMITH/AFP/Getty Images)

Mortgage rates jumped to 4.90% which is a number not seen in nearly seven years based on Freddie Mac’s weekly rate survey. Although an increase was expected the jump of nineteen basis points caught some by surprise. As strong as the economy is purchasing a home continues to be an illusive transaction for many. The rise in rates buffeted by the increase in home prices have left many reconsidering their plans as evidenced by the drop in mortgage applications.

Remember that tax break earlier in the year?

Last December president Trump and the GOP controlled congress touted the tax cut as a “cure-all” and justification of their leadership prowess. Indeed, a good chunk of working people did receive benefits from the tax cut and a few were lucky enough to get bonuses. The average cut was about $1,600.

For those who were positioning to buy a home or refinance their existing mortgage the recent mortgage rate hike has wiped out that savings.

Time	Rate	Payment	Annual
Oct. 2018	4.90%	$1,252
Oct. 2017	3.90%	$1,113
Diff		$139	$1,668
**based on average mortgage of $239,000

Cyclical

Most understand rates and economic metrics are cyclical. In other words when you have an improved economy, you will also see a rise in consumer goods. Also, recently the Feds increased the discount rate. This was done as a preventative measure to thwart inflation. Normally political leaders stay out of the Fed’s business but Donald Trump has continued to intimate their move has contributed to rate increases claiming they will result in a negative impact.

“I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy,” President Donald Trump

Tariffs

Another pressure-point for the economy is the recent drop in the DOW Jones and financial markets. Business leaders, especially those in the real estate sector attribute the decline to the uncertainty of the Trump imposed tariffs and other measures. They feel recent gains may be wiped out.

“These tariffs will translate into higher costs for consumers and U.S. businesses that use these products, including home builders,” Randy Noel, chairman of the National Association of Home Builders

Here is a snapshot of this week’s rate survey

October 11, 2018

	30-Yr FRM	15-Yr FRM	5/1-Yr ARM
Average Rates	4.9 %	4.29 %	4.07 %
Fees & Points	0.5	0.5	0.3
Margin	N/A	N/A	2.77

Freddie Mac produces the weekly rate survey. It is the industry standard for consumers and mortgage professionals to gauge consumer mortgage rates.

Mortgage rates inch up, as do employment numbers

September 8, 2018January 12, 2019 ~ Fred Thomas, III ~ Leave a comment

As expected this week’s mortgage numbers saw a slight increase of two basis points to come in at 4.54% The increase is predicated on economic data which continues to show improvement. Another key factor to support the notion that rates will continue to climb is the latest jobs report which saw new jobs at 201,000.

While rates have risen, the biggest dilemma for those who desire a new mortgage is finding homes that are within their affordability range. As an example, in a year over year comparison rates have increased nearly seventy-five basis points or three-quarters of a percent. So, while it is great the economy is moving forward, consumers must deal with the reality that cost of goods and services also increase.

The result is affordability remains a solid metric but the key with mortgage rates is timing and being in a position to qualify and take advantage of mortgage rates based on your budget.

The impact

Average Mortgage Amount – One Year Analysis
	Average	Sept. 2018	Sept. 2017	Mo Diff
Nationwide	$202,000	$1,069	$939	-$130
California	$320,000	$1,642	$1,487	-$155

While the mortgage of choice remains a 30-year fixed rate based on its amortization to provide more affordable payment, the average mortgage term is approximately seven years (based on data that consumer needs of refinancing).

As mentioned rates have risen, likewise the economy has also strengthened. For most consumers it’s a dollars and cents evaluation, so in their mind the rise is rates is of concern or something that impacts their buying power. As an example, nationwide the difference of $130 each month translates into $1,560 annually or $10,920 based on a seven-year term. Specifically for those in California the numbers are $155 monthly or $1,860 annually which is $13,020 based on the seven-year term.

The question remains; can your budget handle the increase? does the touted tax-cut provide enough money back into your budget to mitigate the increase?

A snapshot of this week’s mortgage rates (popular programs)

Weekly Data

September 6, 2018

	30-Yr FRM	15-Yr FRM	5/1-Yr ARM
Average Rates	4.54 %	3.99 %	3.93 %
Fees & Points	0.5	0.4	0.3
Margin	N/A	N/A	2.77

Mortgage rates keep rising

May 18, 2018January 12, 2019 ~ Fred Thomas, III ~ 1 Comment

An increase of six basis points is normal within week over week reporting. However, it is the trend which has many borrowers showing signs of concern. The benchmark thirty-year mortgage crept to the highest point of 2018 and now sit as 4.610%. The news was reported yesterday as Freddie Mac released its primary market survey which tracks mortgage rate movement.

A seller’s market

Adding consternation to those in the market to purchase a home is the fact the current market is defined as a “seller’s market.” That translates into fewer properties on the market, thus buyers have been forced to make competitive offers and the result is higher sales prices.

Those in the market to purchase a new home or refinance their existing mortgage usually take a very cautious position when contemplating a transaction. The economy has been on a nine-year recovery and each month there has been improvement. Unemployment is at record lows. Some have received bonuses or extra money in their paychecks. All of this may sound good on a political front, however the increase in rates represents higher cost and puts first time buyers in jeopardy as there is added pressure on them to qualify for a loan.

Rates have increased approximately fifty basis points from a year over year comparison

Here is a snapshot of rates for popular programs:

May 17, 2018

	30-Yr FRM	15-Yr FRM	5/1-Yr ARM
Average Rates	4.61 %	4.08 %	3.82 %
Fees & Points	0.4	0.4	0.3
Margin	N/A	N/A	2.77

** each week Freddie Mac publishes the rate survey. It is retrieved from a sampling from its lenders who sell mortgages to them. The report is an industry standard and used to gauge consumer mortgage rate movement.

Mortgage rates show no sign of let-up – Keep rising

February 22, 2018January 12, 2019 ~ Fred Thomas, III ~ Leave a comment

Employee Rhonda Lawson works in the customer call center area at Freddie Mac headquarters in McLean, Virginia, U.S., Photographer: Andrew Harrer/Bloomberg via Getty Images

[McLean, VA] For the eighth consecutive week mortgage rates have continued their climb. Now at 4.40% which is just two basis points in week- over-week reporting, it represents the highest mark of 2018. The increase did not catch anybody off guard as the 10-year Treasury climbed over 2.90%. The 10-year Treasury is known as the long-term index which affects mortgage rates.

Going forward, rates are projected to keep climbing. Also, based on economic movement experts have suggested the Fed is positioned for three and perhaps four discount rate hikes for 2018. This is designed to counter inflationary worries and keep the economy in check.

Consumers haven’t pushed the panic button as when evaluating year over year data, mortgage rates have only increased fourteen basis points. That difference is well within the range of mortgage rate movement as they are very cyclical.

Rate recap for the week:

February 22, 2018

	30-Yr FRM	15-Yr FRM	5/1-Yr ARM
Average Rates	4.40%	3.85%	3.65%
Fees & Points	0.5	0.5	0.4
Margin	N/A	N/A	2.75

Freddie Mac known technically as Federal National Home Loan Corporation purchases mortgages from it approved mortgage originators. The primary market rate survey is the industry standard published weekly and is used by consumers and industry experts to gauge rate movement.

Both mortgage rates and applications jump

January 25, 2018January 12, 2019 ~ Fred Thomas, III ~ Leave a comment

This morning the benchmark 30-year mortgage jumped eleven basis points and came in at 4.15%. Likewise, mortgage applications also increased almost five percent from week over week reporting. As the economy continues to pick up steam consumers can expect to see rates increase accordingly as they are cyclical in nature and move based on a variety of economic factors.

Also, it is noted consumer confidence has improved. Combined with the heralded tax cut and the recent announcement of companies providing bonuses to employees, the result is more household cash to work with. Some analyst caution the giddiness being reported about the bonuses and cuts. Just this morning Home Depot joined the list of companies who will provide bonuses to eligible staff to the tune of up to $1,000. For most, the additional cash might seem like a great windfall but in the larger picture higher interest rates or higher cost of goods will reduce perceived savings.

Short term gain, long-term loss

Could the tax cuts touted by Donald Trump be another one of his “slight of hand” hustles? Throwing a bone to average people, while he and his elite group escape with the real riches?

Let, take a look. As an example, assuming a mortgage of $200,000, prior to the tax cuts rates where around 3.90%. Compared with today’s mortgage survey release of 4.15%, the difference is 25 basis points here is the bottom-line.

3.90% principal and interest = $943

4.15% principal and interest = $972

The difference is a motley $29 per month which seems nominal. However annually it is $348 and factoring seven years (which is the average time consumers keep their mortgage) the result is $2,436. So, while the bonuses are great in today’s dollars, it is more than wiped out based on higher cost.

Short term gain, long-term loss

There is a long-standing political debate on what effect the tax cut has for the “average” family that typically lives paycheck? No doubt in the capital society which we live in it is great to receive extra money such as bonuses or tax cuts, however the issue for many is sustainability or how long it will last?

The jump is interest rates is one sign attributed to the increase in mortgage applications. On one hand consumers may have extra money but on the other hand those who are in the market for a refinance or new mortgage realize any delay in making an application or locking in a rate may subject themselves to higher movement or additional cost to their budget.

The mortgage rates which are reflected are from the Freddie Mac weekly rate survey. The mortgage application data is from the Mortgage Bankers Association from the “Mortgage Application Weekly Survey.”

Rate recap

January 25, 2018

	30-Yr FRM	15-Yr FRM	5/1-Yr ARM
Average Rates	4.15%	3.62%	3.52%
Fees & Points	0.5	0.5	0.4
Margin	N/A	N/A	2.75

Mortgage rates climb above 4%

January 18, 2018January 12, 2019 ~ Fred Thomas, III ~ 7 Comments

For the first time in eight months mortgage rates have climbed above the 4% threshold. The news was expected as financial markets continue to post positive numbers including improved business and consumer confidence.

Lenders who fund mortgage applications typically offer rates in a range based on various factors. Today’s report is from Freddie Mac’s primary market rate survey. It is the industry standard used to gauge rates and the data is compiled from a sample of lenders who sell their closed mortgage loans on the secondary market. This week’s rate is 4.04% and is based on the benchmark thirty-year mortgage.

While mortgage rates inched higher they stil make home ownership affordable. At the same time consumers realize timing is everything and as overall economic conditions improve, increases may be the result.

Current snapshot of rates

January 18, 2018

	30-Yr FRM	15-Yr FRM	5/1-Yr ARM
Average Rates	4.04%	3.49%	3.46%
Fees & Points	0.6	0.5	0.3
Margin	N/A	N/A	2.74

source: Freddie Mac Rate Survey

Mortgage rates jump on speculation of a tax deal

October 26, 2017January 12, 2019 ~ Fred Thomas, III ~ Leave a comment

It was in the middle of July when mortgage rates were at 4%. Based on yesterday’s mortgage rate survey the benchmark 30 years mortgage jumped six basis points in week over week reporting and came in at 3.960%. Most know rate movement is cyclical so the increase must be viewed based on trends not as an isolated incident.

Industry experts attributed the jump to the increase of the yields on the 10-year Treasury bond, which jumped nearly 10 basis points. The 10-year bond is the primary indices which affect movement on the 30-year mortgage.

The markets reacted based on anticipation that a tax deal may be accomplished? Also, yesterday the Senate passed procedural regulations known as a budget resolution making it a bit easier for a deal to be reached. If things work out as projected, it would mark a key win for the Trump administration which has been bogged down since taking office by not being able to tout any legislative victories.

In the meantime, homeowners who are purchasing a property or attempting to refinance their existing mortgage are gauging rates to make sure their budgets are not negatively impacted.

Here is a snapshot of this week’s rates:

October 26, 2017

	30-Yr FRM	15-Yr FRM	5/1-Yr ARM
Average Rates	3.94%	3.25%	3.21%
Fees & Points	0.5	0.5	0.4
Margin	N/A	N/A	2.74

The Freddie Mac rate survey is published every Thursday. It is an industry standard and used to gauge mortgage movement.

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October 11, 2018

Freddie Mac produces the weekly rate survey. It is the industry standard for consumers and mortgage professionals to gauge consumer mortgage rates.

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Weekly Data

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