Mortgage rates inch up, as do employment numbers


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 inch up…..but still are affordable


Mortgage rates inched up this week to land at 4.520%.  The one basis point rise in week over week reporting is not the biggest news.  The rate represents the benchmark thirty-year conventional mortgage.

(Photo by Mannie Garcia/Bloomberg via Getty Images)
(Photo by Joshua Roberts/Bloomberg via Getty Images)

 

Low rates do not mean a thing if you can’t find an affordable home!

 

Affordability index

 

For most homebuyers or even those wishing to take advantage of low rates, the trick is having the credit to quality and having the down payment (or sufficient equity).  Recently, another element has been added to the equation of securing a home; finding an affordable property.  For many the reality of an “average home price” results in sticker shock.  Some parts of the country have the price well over $500,000, and that is for first-timers!

The result of would be buyers remaining on the sidelines is a reduction of mortgage applications.  If the pace continues, expect lenders to trim staffing so their operations are “right-sized.”

 

Rates are cyclical and while many in the public policy arena tout a positive economic environment, for homebuyers that news triggers higher interest rates as well as higher home prices.

 

Here is a snapshot of this week’s rates:

August 30, 2018

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 4.52 % 3.97 % 3.85 %
Fees & Points 0.5 0.5 0.3
Margin N/A N/A 2.77

Freddie Mac is an institutional investor and provider of mortgage funds to local lenders who work with consumers but sell the mortgages to them.  Each week they publish the mortgage market rate survey which is data obtained from a sample of their pool of lenders.

Mortgage rates keep rising


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.