Goodbye sub 3% mortgages

It was only last July that the 30-year Fixed Rate Mortgage (FRM) dropped below 3% for the first time and this week it moved back above 3% again, following the direction of the 10-year Treasury Note (10T).

Mortgage rates

The latest survey from Freddie Mac returned a rate of 3.02% and earned this comment:
“Since reaching a low point in January, mortgage rates have risen by more than 30 basis points, and the impact on purchase demand has been noticeable. While purchase activity remains high, it has cooled off over the last few weeks and is currently on par with early March, prior to the pandemic. However, the rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season.”

The key to the level of the FRM is the 10T. Investors in mortgage-backed securities (bundles of mortgages sold to investors) require a premium – spread – over the yield on 10T.

The chart below shows three rates: the top line in orange shows the rate on the FRM; the blue line at the bottom is the yield on 10T; and the grey line (mostly) in the middle is the difference in the rates – the spread.

Mortgage spreads

For most of the time in recent years this spread has been in the 1.6- 1.8% range. The exceptions have been in times of financial stress: the Great Recession and COVID-19.
Mortgage rates

The current spread is just 1.48%, suggesting that the FRM is actually lower than its historic normal level of 1.6-1.8%.

Regardless of the short-term movement, mortgage rates remain cheap as show by this chart:

Mortgage rates

Read these recent articles:
Mortgage Rates are Rising
How Marblehead’s 2021 Property Tax Rate is Calculated
Essex County 2021 Residential Property Tax Rates: Town by Town guide

If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, please contact me on 617.834.8205 or Andrew.Oliver@SothebysRealty.com.

“If you’re interested in Marblehead, you have to visit the blog of Mr. Andrew Oliver, author and curator of Oliver Reports . He’s assembled the most comprehensive analysis of Essex County we know of with market data and trends going back decades. It’s a great starting point for those looking in the towns of Marblehead, Sale, Beverly, Lynn and Swampscott.”

Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205

www.OliverReportsMA.com
Andrew.Oliver@SothebysRealty.com

Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated

Andrew Oliver
Sales Associate | Market Analyst | DomainRealty.com
REALTOR®

Naples, Bonita Springs and Fort Myers
Andrew.Oliver@DomainRealtySales.com
m. 617.834.8205
www.AndrewOliverRealtor.com

www.OliverReportsFL.com

Mortgage Rates are Rising

On January 9th I published Are mortgage rates about to rise? which started with:
“Following the Georgia Senate election results, which gave control of the Senate to the Democrats, along with the House of Representatives and the White House, the yield on the 10-year Treasury Note (10T) – the most sensitive to increased Government spending – jumped from 0.93% on Monday to 1.13% on Friday, based upon the expectation that increased Government spending would lead to more borrowing which would need higher interest rates to attract investors.”

Since then the yield on 10T has climbed further, spending this week around the $1.30 level before closing yesterday at $1.34.

Why does this matter for mortgage rates?  Because the rate on the 30-year Fixed Rate Mortgage (FRM) is based upon an extra yield – spread – that investors require over that available on 10T. The national average reported on Thursday ( based on rates from Monday-Wednesday) was 2.81%, up from the record low of 2.65% in January, and indications are that the rate will rise again next week.

Here are three charts:
The FRM since the beginning of 2020:

Mortgage rates

The 10T yield:

US Treasuries

 

And the Spread between the two (this chart starts in 2005):

Mortgage rates

For most of the last 15 years the spread has been in the 1.6-1.8% range. The major exceptions have occurred during times of financial stress – in the Great Recession of 2008 and in the pandemic of 2020. But when the stress diminishes, the spread returns to its normal range.

I strongly recommend the weekly Market Trends from HSH.com (click HSH.com to subscribe) for really good commentary on the economy and mortgage markets. In this week’s newsletter they write: “As the economy continues to slowly recover from pandemic-interrupted activity, the process is sure to be an uneven one. However, if there’s an accumulation of solid news in a short period, it would be sufficient to lift interest rates a little bit, expanding the distance from previous record lows. In general, that’s what happened this week, and will be the proximate cause of another bump in mortgage rates next week.

To be sure, interest rates can only rise so far at a time when millions remain out of work, the economy hasn’t yet filled in the output gap caused my pandemic-related interruptions in economic activity and the Fed remains steadfastly committed to low-rate and extraordinary monetary policies. But market-engineered interest rates can still move upward, since these rely on investor perspectives about future levels of growth, inflation and hedges against whenever the Fed may start to trim bond buys and consider raising interest rates.”

For the last year the Federal Reserve has been pouring vast amounts of cash into the monetary system, action that has both driven short-term rates down sharply and contributed to a rise in asset prices as seen in a booming stock market. In recent weeks, the market chatter has been more about when interest rates will rise rather than if. And market expectations can be self-fulfilling.

The Mortgage Bankers Association (MBA) published its forecast for mortgage rates this week. While the MBA has a track record of forecasting rising mortgage rates, it is worth noting that the latest forecasts are for the FRM to reach 3.4% by the end of 2021, 3.9% in 2020 and 4.4% in 2023.

While I applaud the bravery of anybody who attempts to make long-range forecasts, I pay little attention to them. HSH, however, has also forecast that the FRM could reach as high as 3.44% this year.

I will conclude as I usually do with this one chart, perhaps the most important one in this article. By any historical standard mortgage rates are extremely attractive. And 15-year mortgages the most attractive of all for those who can afford the higher monthly payment.

Mortgage rates

Mortgage Markets Return to Normal
Essex County 2021 Residential Property Tax Rates: Town by Town guide

Andrew Oliver

Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205

www.OliverReportsMA.com
Andrew.Oliver@SothebysRealty.com

Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated

Andrew Oliver
Sales Associate | Market Analyst | DomainRealty.com
REALTOR®

Naples, Bonita Springs and Fort Myers
Andrew.Oliver@DomainRealtySales.com
m. 617.834.8205
www.AndrewOliverRealtor.com

“If you’re interested in Marblehead, you have to visit the blog of Mr. Andrew Oliver, author and curator of OliverReports.com. He’s assembled the most comprehensive analysis of Essex County we know of with market data and trends going back decades. It’s a great starting point for those looking in the towns of Marblehead, Salem, Beverly, Lynn and Swampscott.”

Mortgage rates rise at the fastest pace in months*

On January 9th I published Are mortgage rates about to rise?.

At that time the yield on the US Treasury 10-Year Note (10T) – the benchmark for the 30-year Fixed rate Mortgage (FRM) – had risen to 1.13%, compared with a low of under 0.6% last August.

Well, as of this morning, the yield on 10T is standing at 1.29%. The FRM as of last Thursday’s Freddie Mac survey was 2.73%, but will rise this week, possibly sharply.

My January article concluded: “A number of factors will influence the course of interest rates in the coming months, but at this point it looks as though 2.65% may represent the low point for the FRM.”

I will publish an updated review of mortgage rates this coming Saturday.

*This morning’s headline from CNBC

Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205

www.OliverReportsMA.com
Andrew.Oliver@SothebysRealty.com

Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated

Andrew Oliver
Sales Associate | Market Analyst | DomainRealty.com
REALTOR®

Naples, Bonita Springs and Fort Myers
Andrew.Oliver@DomainRealtySales.com
m. 617.834.8205
www.AndrewOliverRealtor.com

“If you’re interested in Marblehead, you have to visit the blog of Mr. Andrew Oliver, author and curator of OliverReports.com. He’s assembled the most comprehensive analysis of Essex County we know of with market data and trends going back decades. It’s a great starting point for those looking in the towns of Marblehead, Salem, Beverly, Lynn and Swampscott.”

Are mortgage rates about to rise?

Following the Georgia Senate election results, which gave control of the Senate to the Democrats, along with the House of Representatives and the White House, the yield on the 10-year Treasury Note (10T) – the most sensitive to increased Government spending – jumped from 0.93% on Monday to 1.13% on Friday, based upon the expectation that increased Government spending would lead to more borrowing which would need higher interest rates to attract investors.

Why does this matter for mortgage rates?  Because the rate on the 30-year Fixed Rate Mortgage (FRM) is based upon an extra yield – spread – that investors require over that available on 10T. The national average reported on Thursday ( based on rates from Monday-Wednesday) was a record low of 2.65%, but next week will almost certainly see an increase.

Here are three charts:
The FRM since the beginning of 2020:
Mortgage rates

The 10T yield:
Treasury yield

And the Spread between the two (this chart starts in 2005):
Mortgage rates

For most of the last 15 years the spread has been in the 1.6-1.8% range. The major exceptions have occurred during times of financial stress – in the Great Recession of 2008 and in 2020.

I will add links at the bottom of this article to previous ones describing the relationship between 10T and FRM in more detail.

Meanwhile, note that the FRM is a national average based on rates from Monday-Wednesday, when the yield on 10T was 0.93%, 0.96% and 1.04%; that the yield used in my spread calculation was Thursday’s 1.08%, and that on Friday it was 1.13%.   That means that the spread between the latest reported FRM – 2.65% – and Friday’s 10T- 1.13% – was just 1.52%, well below the average in recent years of 1.7%.

A number of factors will influence the course of interest rates in the coming months, but at this point it looks as though 2.65% may represent the low point for the FRM.

Mortgage Markets Return to Normal
Essex County 2021 Residential Property Tax Rates: Town by Town guide

Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®

Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205

Licensed Sales Agent in Florida

www.OliverReports.com
Andrew.Oliver@SothebysRealty.com

Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated

“If you’re interested in Marblehead, you have to visit the blog of Mr. Andrew Oliver, author and curator of OliverReports.com. He’s assembled the most comprehensive analysis of Essex County we know of with market data and trends going back decades. It’s a great starting point for those looking in the towns of Marblehead, Salem, Beverly, Lynn and Swampscott.”

“Mortgage rates low, housing prices high for three years”

CoreLogic has released its Three-Year Housing and Mortgage Outlook and the report says millennials will add substantial demand for housing, while finding low rates and high prices.

“Low mortgage rates, growing numbers of first-time buyers, and gradually rising home values are three housing market trends we expect during the next three years.”

Mortgage rates
Tailwind
Home Prices

Here is a link to the full Corelogic report: Mortgage and Housing Market Outlook

Conforming Mortgage Loan Limits raised for 2021
Mortgage Markets Return to Normal
How Marblehead’s 2021 Property Tax Rate is Calculated

Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com
REALTOR®

Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205

www.OliverReports.com
Andrew.Oliver@SothebysRealty.com

Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated

“If you’re interested in Marblehead, you have to visit the blog of Mr. Andrew Oliver, author and curator of OliverReports.com. He’s assembled the most comprehensive analysis of Essex County we know of with market data and trends going back decades. It’s a great starting point for those looking in the towns of Marblehead, Salem, Beverly, Lynn and Swampscott.”