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:
The 10T yield:
And the Spread between the two (this chart starts in 2005):
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
[email protected]
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.”
Would you like a 1% mortgage?
HSBC is offering a 5-year, variable rate mortgage at 0.99%. (more…)
“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.”
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
[email protected]
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 Markets Return to Normal
Before delving into the details, let me show you the answer, the chart showing the spread – difference- between the 30-year Fixed Rate Mortgage (FRM), as reported weekly by Freddie Mac, and the yield on the 10-year US Treasury Note (10T):
In recent years the 30-year Fixed Rate Mortgage (FRM) has averaged a spread of about 1.7% above the yield on the US 10-year Treasury (10T). (more…)
Mortgage Rates: Another new low
As if in response to my questioning whether mortgage rates were about to rise in Mortgage Rates: another Head Fake or Early Warning? the 30-year Fixed Rate Mortgage (FRM) as reported by Freddie Mac dropped to yet another new low this week of just 2.72%.
This is the moment when you turn to a friend or family member – probably the latter at the moment – and say “when I bought my house in 19xx the rate was – fill in the blank, 7%,8% or whatever.” My highest was 7.3% in 1999. (more…)
Mortgage demand on the increase again
November is not historically a strong season for homebuying, but this one, like the rest of 2020, isn’t following any rules.
Homebuyer demand is surging again, after taking a slight break around the election. (more…)
Mortgage Rates: another Head Fake or Early Warning?
Back in June I wrote Mortgage rate head fake, when mortgage rates jumped but only very briefly.
On Wednesday this week I wrote: “In normal times, the 30-year Fixed Rate Mortgage (FRM) is priced based upon the extra yield investors require over and above that which can be received on the US 10-year Treasury Note (10T). In recent years that extra yield – spread – has averaged 1.7%.
2020, as you may have noticed, has not been normal. In the peak of the disruption to mortgage markets in April the spread reached 2.7%, as the yield on 10T was driven sharply lower, dropping from 1.8% at the beginning of the year to as low as 0.55%.
But recently, the yield has been climbing and now approaches 1%. And the spread over 10T has been under 2% for the last three weeks.”
Here is a chart of the spread in recent years and by quarter in 2020: (more…)
Are Mortgage Rates about to rise?
In normal times, the 30-year Fixed Rate Mortgage (FRM) is priced based upon the extra yield investors require over and above that which can be received on the US 10-year Treasury Note (10T). In recent years that extra yield – spread – has averaged 1.7%.
2020, as you may have noticed, has not been normal. In the peak of the disruption to mortgage markets in April the spread reached 2.7%, as the yield on 10T was driven sharply lower, dropping from 1.8% at the beginning of the year to as low as 0.55%.
But recently, the yield has been climbing and now approaches 1%. And the spread over 10T has been under 2% for the last three weeks. (more…)
Lies, Damned Lies and Statistics: Q3 GDP growth
This was the title of the first report I wrote for the Marblehead Reporter back in 2008.*
The phrase came to my mind when I saw these two headlines on Thursday:
“US GDP surged a record 33% in the 3rd quarter as the economy reopened, roughly double the next-biggest jump.” (Business Insider)
“U.S. GDP booms at 33.1% rate in Q3, better than expected” (CNBC)
Wow! What amazing growth! As CNBC says – and they are financial experts – the economy is booming!
But wait a minute….. 22.6 million people were claiming unemployment benefits when the Government last reported numbers on October 10, compared with just 1.4 million a year ago. How does that square with a booming economy? (more…)
Mortgage demand slows, but is still far ahead of a year ago
“Homebuyer demand is incredibly strong compared with last year, but there appears to be a slight pullback this month.
A drop in buyer demand caused total mortgage application volume to fall 0.6% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Applications to purchase a home fell 2% for the week, the fourth straight week of declines. Purchase demand is down nearly 7% compared with four weeks ago. Volume, however, is still 26% higher than one year ago.
The drop may be seasonal, although not much has conformed to normal patterns in the year of Covid-19. It may be more a factor of the incredibly low supply of homes for sale. Inventory continues to set record lows, especially at the entry level of the market.
Strong demand is outstripping any new supply coming onto the market, thanks to consistently low mortgage rates, which set a new record two weeks ago.
Rates did move slightly higher last week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.02% from 3%, with points increasing to 0.36 from 0.32 (including the origination fee) for loans with a 20% down payment. That rate was a full percentage point higher a year ago.((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.OliverReports.com
[email protected]
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 applications still running well ahead of a year ago
“Applications to refinance a home, which are most sensitive to weekly interest rate movements, fell 0.3% for the week but were 44% higher than a year ago. While that annual comparison may seem like a lot, it had been around 100% higher earlier this year. The new record low was also such a tiny move that it clearly had little impact.
Applications for a mortgage to purchase a home fell 2% for the week but were 24% higher annually. That annual comparison is notable because it’s not usually quite that large but has been running high for the past few months. Housing demand continues to be incredibly strong, driven by record low interest rates and a pandemic-induced need to nest in larger homes with space for work and schooling. (more…)
Mortgage applications surge again
After a brief lull to start the month, mortgage demand surged ahead yet again — even with the highest interest rates in several weeks.
Total mortgage application volume increased 6.8% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Refinance demand came roaring back, up 9% for the week and 86% annually. While millions of borrowers already have refinanced over the past year, millions more could benefit, as rates bounce around near record lows. The refinance share of mortgage activity increased to 64.3% of total applications from 62.8% the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 increased to 3.10% from 3.07%, with points and origination fee increasing to 0.46 from 0.32 for loans with a 20% down payment. The rate was 92 basis points higher a year ago.
“Mortgage applications activity remained strong last week, even as the 30-year fixed-rate mortgage and 15-year fixed-rate mortgage increased to their highest levels since late August,” said Joel Kan, an MBA economist. “Both conventional and government refinance activity, and in particular FHA refinances, picked up last week.”
Mortgage applications to purchase a home rose just 3% for the week but were 25% higher than one year ago. Buyers continue to flood the market despite higher home prices and very tight supply. Sales have been strongest on the high end of the market, according to the National Association of Realtors, as consumers seek larger high-tech homes for work and school. That is also where the supply available for sale is greatest.
Realtors report their clients saying that, “work from home will be in place long after the pandemic is over,” said Lawrence Yun, chief economist for the Realtors.
The median price of an existing home sold in August hit yet another record high, which is also reflected in mortgage demand.
“The demand for higher-balance loans pushed the average purchase loan size to another record high. The strong interest in homebuying observed this summer has carried over to the fall,” Kan said. (CNBC)
Goodbye Boston, Hello Marblehead
Mortgage rates dip below 3% – where to next?
“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, 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.OliverReports.com
[email protected]
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
Mortgage applications jump 40%
Mortgage applications to purchase a home rose 3% last week from the previous week and were a stunning 40% higher from a year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. The year-on-year comparison is usually in single digits. While it may have been skewed slightly by the Labor Day holiday,which fell earlier last year, purchase demand is still running significantly higher than a year ago.
For the 15-year fixed, the rate declined to a record low of 2.62% on conventional loans.
“There continues to be resiliency in the purchase market,” said Joel Kan, an MBA economist. “The average loan size continued to increase, hitting a survey high at $368,600. Highlighting the strong overall demand for buying a home, conventional, VA and FHA purchase applications all increased last week.”
Applications to refinance a home loan rose 3% for the week and were 60% higher than a year ago. Refinance volume has been extremely high since rates plummeted last March, but the pool of borrowers who haven’t already taken advantage of these low rates is shrinking.
The refinance share of mortgage activity increased to 63.1% of total applications from 62.5% the previous week. The adjustable-rate mortgage share of activity decreased to 2.2% of total applications. (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.OliverReports.com
[email protected]
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.”
New Mortgage Refinancing fee delayed
The Federal Housing Finance Agency announced Tuesday it is postponing the date it will begin implementing its adverse market refinance fee to Dec. 1.
The FHFA directed Fannie Mae and Freddie Mac to delay the implementation date of their adverse market refinance fee after it was previously scheduled to take effect Sept. 1, 2020.
FHFA is also announcing that the enterprises will exempt refinance loans with loan balances below $125,000, nearly half of which are comprised of lower-income borrowers at or below 80% of area median income. Affordable refinance products Home Ready and Home Possible, are also exempt.
After Fannie Mae and Freddie Mac announced an added 50 basis point fee to all refinances, the housing industry was quick to react. In fact, the industry quickly turned against Fannie and Freddie’s added fee.
The Mortgage Bankers Association was one of the strongest voices in opposition to the new fee, saying, in part, “The additional 0.5% fee on Fannie Mae and Freddie Mac refinance mortgages will raise costs for families trying to make ends meet in these challenging times. In addition, the September 1 effective date means that thousands of borrowers who did not lock in their rates could face unanticipated cost increases just days from closing.”
It also criticized the increase, saying that it would be particularly harmful to low- and moderate-income homeowners.
Mortgage rates dip below 3% – where to next?
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
[email protected]
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.”
Why refinancing just got more expensive
The Federal Housing Finance Agency, the regular for Fannie Mae and Freddie Mac, announced that it would require a 0.5 percent fee, or 50 basis points, on mortgage refinances that close after September 1 through Fannie Mae or Freddie Mac, which purchase most U.S. mortgages from lenders. “Based on their projected COVID-related losses, Fannie Mae and Freddie Mac (the Enterprises) requested, and were granted, permission from FHFA to place an adverse market fee on mortgage refinance acquisitions.”
“In light of market and economic uncertainty resulting in higher risk and costs incurred by Fannie Mae, we are implementing a new loan-level price adjustment,” the letter from the larger of the two government-sponsored enterprises said.
And Freddie Mac said: “As a result of risk management and loss forecasting precipitated by COVID-19 related economic and market uncertainty, we are introducing a new Market Condition Credit Fee,” it said.
The response from the Mortgage Bankers Association was: “Tonight’s announcement by the GSEs flies in the face of the administration’s recent executive actions urging federal agencies to take all measures within their authorities to support struggling homeowners,” the MBA statement said.
“Requiring Fannie Mae and Freddie Mac to charge a 0.5% fee on refinance mortgages they purchase will raise interest rates on families trying to make ends meet in these challenging times,” it said. “This means the average consumer will be paying $1,400 more than they otherwise would have paid.”
“Even worse, the Sept. 1 effective date means that thousands of borrowers who did not lock in their rates could face unanticipated cost increases just days from closing,” the trade group said.
“The housing market has been able to withstand many of the most severe effects of the COVID-19 pandemic,” MBA said. “The recent refinance activity has not only helped homeowners lower their monthly payments, but it is also reducing risk to the GSEs and taxpayers. At a time when the Federal Reserve is purchasing $40 billion in agency MBS per month to help reduce financing costs for mortgage borrowers to support the broader economy, this action raises those costs and undermines the Federal Reserve’s policy.
MBA called on the FHFA to reverse the decision.
“This announcement is bad for our nation’s homeowners and the nascent economic recovery,” the MBA statement said. “We strongly urge FHFA, which had to approve this policy, to withdraw this ill-timed, misguided directive.”
Mortgage rates dip below 3% – where to next?
Goodbye Boston, Hello Marblehead
“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.”
Andrew Oliver
REALTOR®
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
m 617.834.8205
www.OliverReports.com
[email protected]
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
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