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Mortgage Rate Swings May Mean “Bumpy” 2014 Housing Market        

12/30/2013

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Climbing mortgage rates in 2013 corresponded with declines in home buying, a trend that could to some extent continue in coming months as interest rates adjust to shifts in the Federal Reserve’s monetary stimulus effort.

The average of 30-year fixed-rate mortgage interest rates so far this year compared against new-home sales illustrates that inversely proportional relationship: When interest rates go up, demand from would-be homeowners drops. 

When rates as measured by Freddie Mac started rising in May and averaged 3.54% for the month, the seasonally adjusted annual rate of new home sales dropped by 4% from the prior month, according to the most recent housing data from the Commerce Department. Meanwhile, in October, mortgage rates dropped by three-tenths of a percentage point just as new home sales surged 18%.

The trend could continue in 2014, experts said, especially if rates change significantly.

“Particularly if we see a pretty quick rise – maybe a half a percentage point to percentage point rise — it’ll make for some bumpy demand in 2014,” said Ellen Haberle, an economist at Redfin, an online real-estate firm.

 Mortgage rates first spiked in May after the Fed signaled it was considering pulling back its bond-buying program meant to keep a lid on long-term interest rates. The housing market initially stumbled, but started to recover once the central bank decided against any changes to the stimulus effort throughout the summer and into the fall.

 Mortgage rates are still at historical lows, but they are already starting to creep upward once again. Freddie Mac said Thursday the average 30-year fixed rate mortgage was at 4.48%, its highest level since mid-September.

 The interest rate on U.S. Treasurys is also going up. On Thursday, the yield on 10-year notes hit 3%, its highest level since September and the second time this year it has reached that mark. That threshold could signal higher interest rates ahead because it is used as a reference point for the cost of borrowed money for U.S. consumers and businesses. A higher yield can push up mortgage rates.

 While rising interest rates could continue to drag on the housing market, it could also encourage those people waiting on the fence to make a decision to buy.

 Even with rising rates, homes data is starting to show underlying strength in the market. The Commerce Department’s new-home sales reports for October and November marked the two strongest months of new-home sales since mid-2008, and sales in November alone were up nearly 17% from a year earlier, the report said.

 New home sales data are a leading indicator in housing trends because  sales are tallied at the signing of a contract rather than the closing. But they are an imperfect gauge because homebuilders are sometimes willing to buy down interest rate for buyers.

 Data for pending-home sales in November, which is a similar measure for previously owned homes, will be released on Monday by the National Association of Realtors

source: http://blogs.wsj.com/economics/2013/12/27/mortgage-rate-swings-may-mean-bumpy-2014-housing-market/
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Job growth drives mortgage rate jump

12/9/2013

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Mortgage rates jumped this week on stronger-than-expected economic reports, according to Freddie Mac's weekly survey.

The 30-year, fixed-rate loan, the most popular product for homebuyers, rose to 4.46% from 4.29% last week. The average rate on a 15-year, fixed-rate mortgage, typically used for refinancing higher interest mortgages, also jumped 0.17 percentage point to 3.47%. 

 This week's rate approached a high for the year. Rates on the 30-year have ranged from a low of 3.34% in the first week of January to a high of 4.58% in August.

Frank Nothaft, Freddie's chief economist, cited job creation as a prime reason for the rate spike.

"Private companies added 215,000 new jobs in November according to the ADP employment report, well above the consensus," he said. "In addition, revisions added 54,000 jobs in the prior month." 

Read more: http://money.cnn.com/2013/12/05/real_estate/mortgage-rate-rise/
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Mortgage Rates Highest in More than 2 Months

12/3/2013

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Mortgage rates up a bit, but still near record lows

12/2/2013

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WASHINGTON — Average U.S. mortgage rates rose modestly this week, a move that makes home-buying a bit less affordable. Still, rates remain near historically low levels.

Mortgage buyer Freddie Mac said Wednesday that the average rate on the 30-year loan increased to 4.29 percent from 4.22 percent last week.

The average on the 15-year fixed-rate loan ticked up to 3.3 percent from 3.27 percent.

Rates have risen nearly a full percentage point since May after the Federal Reserve signaled it might slow its bond purchases by the end of the year.

Rates peaked at nearly 4.6 percent in August. But the Fed held off in September and most analysts expect it won’t move until next year.

The increase in mortgage rates has contributed to a slowdown in home sales over the past two months.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week.

The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage was unchanged at 0.7 point. The fee for a 15-year loan also was unchanged at 0.7 point.

The average rate on a one-year adjustable-rate mortgage edged down to 2.6 percent, from 2.61 percent last week. The fee was unchanged at 0.4 point.

The average rate on a five-year adjustable mortgage edged down to 2.94 percent this week, from 2.95 percent last week.

The fee was unchanged at 0.5 point.

Source: http://www.poughkeepsiejournal.com/viewart/20131201/LIFE/312010047/Mortgage-rates-up-bit-still-near-record-lows
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Average 30-year mortgage rate edges up to 4.16%

11/18/2013

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WASHINGTON (AP) — Average U.S. rates on fixed mortgages rose slightly last week but remained near historically low levels.

Mortgage buyer Freddie Mac says the average rate on the 30-year loan increased to 4.16% from 4.10% last week, which was the lowest level in four months. The average on the 15-year fixed mortgage rose to 3.27% from 3.20%.

Rates have been falling since September when the Federal Reserve surprised investors by continuing to buy $85 billion a month in bonds. The purchases are intended to keep long-term interest rates low.

Slower hiring in recent months has many analysts predicting that the Fed will maintain the current pace of the bond purchases into early next year, which should keep mortgage rates low for the time being.

The recent drop in mortgage rates could help boost home sales, which slowed in September after rates reached their highest averages in two years.

The decline in sales has also affected price gains. Real estate data provider CoreLogic said Tuesday that a measure of U.S. home prices rose only slightly in September from August, a sign that prices are leveling off after big gains earlier this year.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage rose to 0.8 point from 0.7 point. The fee for a 15-year loan was unchanged at 0.7 point.

The average rate on a one-year adjustable-rate mortgage fell to 2.61 percent from to 2.64 percent. The fee remained at 0.5 point.

The average rate on a five-year adjustable mortgage was steady at 2.96 percent. The fee edged up to 0.5 point from 0.4 point

Source:  http://www.usatoday.com/story/money/personalfinance/2013/11/07/mortgage-rates/3465703/

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Mortgage rates climb for second consecutive week

11/15/2013

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Purchase loans expected to buck rising mortgage rates next year 

10/30/2013

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Mortgages Swoon to Lowest Level Since June

10/28/2013

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Mortgage rates tumbled this week as economic data disappointed investors. Concerns about the nation's debt ceiling lingered, even after Congress reached a temporary deal.

Compare Mortgage Rates in Your Area

The benchmark 30-year fixed-rate mortgage fell to 4.27% from 4.42% last week, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.32 discount and origination points. One year ago, that rate stood at 3.61%. Four weeks ago, it was 4.47%.

This is the lowest level the 30-year fixed has reached in the last four months, according to Bankrate's weekly survey.

The benchmark 15-year fixed-rate mortgage fell to 3.37% from 3.49% last week, and the benchmark 5/1 adjustable-rate mortgage fell to 3.27% from 3.31%. The benchmark 30-year fixed-rate jumbo fell to 4.38% from 4.55%.

Weekly national mortgage survey

Results of Bankrate.com's Oct. 23, 2013, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

30-year fixed 15-year fixed 5-year ARM
This week's rate: 4.27% 3.37% 3.27%
Change from last week: -0.15 -0.12 -0.04
Monthly payment: $813.63 $1,169.05 $719.90
Change from last week: -$14.58 -$9.70 -$3.64

When the shutdown ended last week and Congress sealed an agreement to fund the government until January, some industry observers feared mortgage rates would rise. Instead, mortgage rates dived as investors digested the news that the U.S. debt ceiling debacle has merely been postponed.

"While we did get an agreement, they just delayed the problem for three months," says John Stearns, a mortgage banker at American Fidelity Mortgage Services in Mequon, Wis. "I think rates are going to stay low until we start hearing the rhetoric again in January. Plus, we are not getting consistently good economic data."

The Labor Department released the September employment report this week, and it was disappointing at best. The economy added only 148,000 jobs during that month. That's at least 30,000 fewer jobs than economists had expected.

The weak employment report helped push rates down, as it was another indication that the Federal Reserve will not pull back on the economic stimulus program this year. The Fed says it will begin to cut back on the $85 billion-per-month bond-purchasing program once the labor market is strong enough.

"The Fed is not going to withdraw the stimulus for now, given the poor performance of the jobs market," says Cameron Findlay, chief economist for Discover Home Loans.

Findlay expects mortgage rates to stay somewhat stable until the end of the year.

Rates might even drop a little more as the debate over the debt ceiling heats up again and if economic reports continue to point to a weak economy, says Derek Egeberg, a branch manager for Academy Mortgage in Yuma, Ariz. "For the next two months, I think (mortgage and Treasury bonds) become very attractive and mortgage rates might continue to decline," he says.

Don't expect rates to tumble back into the 3% range, Egerberg says.

"If they continue to decline at this pace, I don't think we would see more than a quarter of a percent reduction," he adds.

Refinancers and homebuyers should take advantage of the extra time and lock as soon as they feel comfortable with the rate and the deal they are getting, mortgage professionals say.

Several factors will put upward pressure on rates early next year, including the new deadline to raise the debt ceiling, the possibility that the Fed will trim the bond-purchasing program then and new mortgage rules that go into effect January.

"Everybody now thinks 4% is the new normal," Egeberg says. "But it's artificial." He predicts that if the Fed pulls back on the stimulus next year, the 30-year fixed could shoot up to 5% or 6%.

"I think some people might be shocked that they missed the rates we have today, given how quickly this is going to change," he adds.

Source: http://www.foxbusiness.com/personal-finance/2013/10/24/mortgages-swoon-to-lowest-level-since-june/
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Refinance applications rise following taper-driven drop in rates 

10/11/2013

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The Refinance Index rose 2.4% (to 1,995 from 1,947) after the Fed decided to maintain its current pace of asset purchases. The bond market has been re-adjusting to the idea that we may see the end of quantitative easing soon, and then the Fed surprised everyone. This has given people one last chance to refinance.

The MBA reported that the share of refinance applications rose to 63%. Going forward, home price appreciation will drive refinance activity as previously underwater homeowners eventually get back to positive equity and take advantage of lower rates. Slowing refinance activity could be a negative for originators like PennyMac (PMT) and Redwood Trust (RWT).

Policy could have an impact, though. President Obama gave a speech regarding housing in which he said he wants everyone to be able to refinance. That means HARP 3.0 (another wave of the Home Affordable Refinance Program), which would presumably extend to non-government mortgages and would have a later cutoff date than early 2009. If this happens, expect another refinance wave.

Implications for mortgage REITs

Refinancing activity affects prepayment speeds, which are a critical driver of mortgage REIT returns. Prepayment speeds occur because homeowners are allowed to pay off their mortgage early, without penalty, and when interest rates fall, those who can refinance at a lower rate do. This is good for homeowners. However, it isn’t necessarily good for mortgage lenders—especially REITs. When homeowners prepay, the investor loses a high-yielding asset and is forced to reinvest the proceeds in a lower-rate investment. This means lower returns going forward. A rise in prepayment speeds could negatively affect REITs, like American Agency Capital Corp. (AGNC), Annaly Capital Management, Inc. (NLY), Hatteras Financial Corp. (HTS), CYS Investments, Inc. (CYS), and Capstead Mortgage Corporation (CMO). That said, the increase in rates has basically put prepayment worries on the back burner for the REITs.

However, as rates increase, prepayments become less of a problem for REITs. But increasing rates bring their own set of problems, and REITs face mark-to-market hits on their portfolio and must adjust their hedges to a more volatile interest rate environment. Mortgage-backed securities outperform in stable interest rate environments, but they’re highly vulnerable to interest rate shocks. As we’ve seen from the mortgage REIT earnings so far, virtually everyone is reporting a substantial decline in book value as higher rates have taken their toll. It would be ironic to see the only silver lining of increased rates (lower prepayment speeds) taken away from the REITs as well.

Source: http://marketrealist.com/2013/10/refinance-applications-rise-following-taper-driven-drop-rates/
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Average fixed mortgage rates down to 3-month low

10/7/2013

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WASHINGTON — Average U.S. rates on fixed mortgages fell for the third straight week to their lowest point in three months, as a decline in consumer confidence and the onset of the government shutdown forced rates down.

Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan dropped to 4.22 percent from 4.32 percent last week. The average on the 15-year fixed loan declined to 3.29 percent from 3.37 percent.

Both are the lowest averages since early July.

Rates began to fall last month after the Federal Reserve held off slowing its $85-billion-a-month in bond buys, which have kept rates low. They fell further this week as the shutdown prompted investors to sell stocks and buy Treasury bonds. Mortgage rates tend to follow the yield on the 10-year Treasury note.

The 10-year note traded at 2.63 percent Thursday morning, down from 2.71 percent on Sept. 23.

The Federal Housing Administration, which guarantees about 30 percent of U.S. home mortgages, says that if the partial shutdown continues for an extended period and the agency’s funding runs out, it wouldn’t be able to continue approving loans.

In that case, “We do expect that potential homeowners will be impacted, as well as home sellers and the entire housing market,” the FHA said in a contingency plan.

Buyers wouldn’t disappear. But some would linger in limbo until the government reopened and a backlog of applications cleared.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage was steady at 0.7 point. The fee for a 15-year loan also was unchanged at 0.7 point.

The average rate on a one-year adjustable-rate mortgage was unchanged at 2.63 percent and the fee held at 0.4 point.

The average rate on a five-year adjustable mortgage dipped to 3.03 percent from 3.07 percent. The fee rose to 0.6 point from 0.5 point.

Source: http://www.poughkeepsiejournal.com/viewart/20131006/LIFE07/310060037/Average-fixed-mortgage-rates-down-3-month-low


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