Mortgage Rates This Week – February 28, 2011

Employment data is released Friday

Mortgage rates improved last week as Wall Street’s concerns about the Middle East trumped its fears of inflation. Conforming and FHA mortgage rates in South Carolina fell to a 3-week low.

Last week marked the 2nd straight week in which mortgage rates fell, a streak that follows four straight weeks of climbing mortgage rates.

It’s been a bout of good fortune for rate shoppers and home buyers.

In addition, according to Freddie Mac’s weekly mortgage rate survey, the average spread between conforming 30-year fixed rate mortgages and 5-year ARMs has widened further.

The two benchmark products are now separated by 1.15%. It’s the largest interest rate gap in recent history; one that yields a monthly payment difference of $68 per $100,000 borrowed.

This week, it’s unclear in what direction mortgage rates will go.

On one side, there’s ongoing unease related to protests in Libya and its neighbors, and that’s driving safe haven buying. 

“Safe haven buying” describes when investors flee risky situations and put their money in the safest places possible. Mortgage bonds are one such place, so when safe haven buying is in effect, bond demand is high so bond yields (i.e. mortgage rates) fall.

On the other side, inflation is ramping up.

Recent economic data shows that the economy is expanding, and the Federal Reserve is maintaining its accommodative growth policies. Therefore, this week, the key economic event will be Friday’s jobs report. if job creation is high, expect inflation fear to re-ignite, and mortgage rates to rise.

Another risk factor for this week’s rate shoppers is that tensions begin to settle in the Middle East, or that Wall Street gets more comfortable with rising oil prices. If that happens, safe haven buying will subside and mortgage rates will resume rising.

There appears to be more reasons for mortgage rates to rise this week than for them to fall. Plan accordingly.

If you have not locked a mortgage rate yet, this week may represent your last chance to get a low one. Talk to your loan officer and make a plan.

Mortgage Rates This Week – February 22, 2011

Safe Haven Buying

Mortgage rates improved slightly last week, rebounding from the worst 1-week loss in recent history. The gains were geopolitical, however; the result of instability in the Middle East region. Economic data was overlooked as investors made a broad-based flight-to-quality.

For just the second time in 2011, conforming mortgage rates in Simpsonville fell on a week-to-week basis.

Rates shouldn’t have dropped, though. Here’s just a sampling of last week’s economic data, all of which can be tied to rising mortgage rates:

Furthermore, the just-released January FOMC Minutes showed an improving economic outlook from members of the Federal Reserve.

Therefore, home buyers and rate shoppers might consider last week’s rate drop a gift. Without the growing unrest in Libya, Egypt and Tunisia, mortgage rates would have moved considerably higher.

Instead, rates fell in a bout of what’s commonly known as “safe haven” buying.

In safe haven buying, global investors shun risk in favor of safer investments; usually in response to market uncertainty. Terror threats is one such event. Regime overthrow is another. Because the event’s long-term effect on markets is unknown, investors choose to move cash to safer asset classes until the future is more clear.

The extra demand for such assets drives prices up and, in the case of mortgage markets, drives rates down.

Last week, rates fell because safe haven buying was so strong. That may not be the case this week. As events play out across the globe, mortgage rates at home in South Carolina will be affected.

There’s a lot of economic data set for release this week, including a large series of housing-related figures. Stronger-than-expected data should cause mortgage rates to rise, safe haven buying notwithstanding.

If you’re still shopping for rates, or looking for a last chance to lock a low rate, now may be your best chance. Call about a rate-locking strategy early in the week. As the situations abroad become more clear, mortgage rates should start to climb once again.

Mortgage Rates This Week – February 14, 2011

Mortgage rates worsened terribly last week. Amid more reports of an improving economy and fears of pending inflation, mortgage rates skyrocketed to their highest levels since April 2010.

According to Freddie Mac, mortgage rates made their largest 1-week jump in more than a year last week, tacking on 0.24% and bringing the average national 30-year fixed mortgage rate up to 5.05%. In some markets, rates are even higher. Since bottoming out in Freddie Mac’s November 11 survey, conforming, 30-year fixed mortgage rates are now higher by close to a full percentage point.

Home buyers in Greenville and across the nation have lost more than 10% of their purchasing power during that time. Rates have also been on a historic run higher, increasing over 9 consecutive days for the first time in almost a decade. That streak ended Friday with rates dropping slightly, and rate shoppers are hopeful the momentum lower continues into this week. It’s not likely. The week is loaded of housing data and housing has been trending better. More strong figures will bolster stock markets at the expense of bonds, driving mortgage rates higher for the 4th week in a row.

In addition, inflation-related figures will be released. That, too, can have a negative impact on mortgage rates. Monday : NAHB Homebuilder Confidence Survey Tuesday : Retail Sales, Consumer Confidence Wednesday : Building Permits, Housing Starts, Producer Price Index, FOMC Minutes Thursday : Consumer Price Index Markets should increase in volatility as the week progresses because of the looming 3-day weekend. Volume will be light Friday in advance of President’s Day.

If you haven’t yet locked your mortgage rate, the time to act is soon — possibly now. Mortgage rates are well off their historical lows, but still relatively inexpensive. Before long, that may no longer be the case.

Underwater? Check Out HARP Rates…

According to a recent report by Zillow, 27% of all homeowners are “underwater” on their mortgage. 

Being “underwater” or upside-down on your mortgage means that you owe more money on your mortgage than your home is worth. 

In some markets the numbers are even uglier.  More than a third of Chicago homeowners owe more on their mortgage than their homes are worth.  In Atlanta over 50% of homeowners are “underwater”.

And those numbers don’t include the homeowners whose current equity is between 0% and 20%.  Many people have purchased homes with a 20% down payment to avoid paying PMI (Private Mortgage Insurance) only to have their homes fall in value resulting in their inability to refinance at lower rates without paying PMI.

The surplus of existing inventory on the market, the current foreclosure moratorium, and falling prices are the reasons that home values have decreased across the country.

Some experts say that we are getting closer to the bottom.  Obviously!  The question is, “Just where is the bottom?”

The good news for some homeowners is that the government has extended the HARP program until June 30, 2011.  HARP stands for Home Affordable Refinance Program. 

You may qualify for the HARP program if you have a conventional (under $417,000) Fannie Mae or Freddie Mac mortgage and are not currently paying PMI.  If that is the case, you may be able to refinance at or close to the historically low mortgage rates now available, without paying PMI, even if you owe 25% more than your home is worth.  If you have two mortgages or an equity line that would have to be included in the refinance you would not qualify.

We can quickly determine whether or not you qualify for the HARP program.  If you have an adjustable rate mortgage or a fixed rate mortgage  with a rate that is higher than the currently available low rates, you should check to see if you qualify for the HARP program.

Posted by Terry Brunner.  Terry is a Senior Loan Officer with Horizon Financial.  Terry can be reached toll free @ (877) 627-9211 x150 or email TBrunner@HorizonFinancial.org.  Visit Horizon’s website at www.horizonfinancial.org

Mortgage Rates This Week – February 7, 2011

Mortgage markets worsened last week as Wall Street came to terms with the expanding economy; and realized the Federal Reserve may be trying to induce inflation.

Better-than-expected retail sales and positive job growth buoyed stock markets and sank bonds.

Mortgage rates in South Carolina rose for the 4th time in 5 weeks last week, extending a losing streak which dates back 4 months.

Today, fixed, conforming rates are three-quarters of a percent higher as compared to the market’s low point, November 3, 2010. For a $200,000 home loan, that size rate hike equates to an increase in a monthly mortgage payment of $89 per month.

Mortgage rates are at their highest levels of the year and, this week, they may continue ticking higher.

There isn’t much data set for release this week so markets will take their cues from two major events — one economic and one political.

The major economic event is Fed Chairman Ben Bernanke’s testimony to the House Budget Committee late-Wednesday. Chairman Bernanke is expected to speak about employment, but will likely touch on other topics of import including economic growth, the U.S. dollar, and the nation’s debt ceiling.

The Fed Chairman’s comments will move mortgage rates in one direction or the other, so locking in advance of his testimony may be prudent. Mortgage rates have more room to rise than to fall, after all.

The second major event is Egypt’s ongoing political strife. By Thursday of last week, Wall Street had shrugged off the region’s crisis and unwound the safe-haven trades that had helped mortgage rates during the week prior.

If instability returns, mortgage rates, once again, will be pressured lower.

Regardless of your rate-locking plan for this week, it’s important to recognize that, although rates have risen, they’re still well below historical average. Therefore, rates may have a lot of room to move higher, still.

If you’re shopping for a mortgage, or are now under contract, consider locking your rate as soon as possible.

Mortgage Rates This Week – January 31, 2011

Jobs in focus this weekMortgage rates improved this week as positive economic data was overshadowed by geopolitical strife. A flight-to-quality drove buy-side activity in mortgage bond markets, which, in turn, helped conforming rates fall across the state of South Carolina.

Last week marks the first time this year that mortgage rates fell on a week-over-week basis, and considering why rates fell, it points to the fragile nature of the global economy.

By all accounts, last week showed that the U.S. economy is in recovery.

  1. Housing data rises to its best levels in 8 months (LA Times)
  2. Consumer sentiment hit a 7-month high (NPR)
  3. Business investment increased 1.4% in December

Furthermore, the Federal Open Market Committee met last week and said that the economy continues to expand (although the pace is slower-than-optimal).

Normally, positive news like this would drive mortgage rates higher, and during the early part of the week, it did. But then, as political problems in Egypt grew larger, international investors began to shift money from their risky assets into the relative safety of the U.S. bond market.

This includes mortgage-backed bonds, of course. The buyer influx pushed up prices and, because bond yields move opposite price, mortgage rates dropped.

The week ended with rates at their lowest levels of the week.

Next week, though, rates could reverse. There’s two developing stories rate shoppers should watch.

The first is related to Egypt. In addition to buying mortgage-backed bonds, investors are gambling that oil prices will rise, too. Egypt is the world’s 21st largest oil producer and a disruption of its supply could send gas prices soaring. This circumstance would be inflationary and inflation is the enemy of mortgage bonds.

Crude oil jumped 4.3% Friday afternoon. If that continues, mortgage rates should start rising.

The second is tied to jobs. Last month’s jobs data was weaker-than-expected on Wall Street and it sparked a mini-rally in mortgage rates to start the year. Jobs are paramount to economic recovery so if this month’s figures are lower than the consensus figure of 150,000, expect mortgage rates in Greenville to fall.  If the number is stronger than 150,000, expect mortgage rates to rise.

The jobs report is released Friday at 8:30 AM ET.