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
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 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
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
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
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.”
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
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.”
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
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
Mortgage rates steady at 3%
Mortgage application volume decreased 5.1% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand is still considerably higher for refinances and purchase applications than it was a year ago.
Applications to refinance a home loan, which are most sensitive to weekly rate moves, fell 7% for the week but were 84% higher annually. Generally, if a borrower can shave 75 basis points off their current rate, it makes financial sense to refinance. So many borrowers have already refinanced that there may not be significant interest for doing so. Still, at today’s low rates, close to 18 million borrowers with good credit scores could benefit from a refinance, according to calculations by Black Knight, a mortgage data and analytics firm. (CNBC).
“MBA’s forecast calls for rates to remain at these low levels, which will continue to spur strong refinance activity and offer homeowners relief in the form of lower monthly mortgage payments during these uncertain economic times,” said the association’s forecaster Joel Kan.
Mortgage applications to purchase a home also fell for the week, down 2%, but were 22% higher than a year ago. Buyer demand was strong heading in to the spring market and appears to have gained strength from the Covid pandemic, as consumers stuck in smaller homes or urban apartments sought more space in the suburbs. The biggest problem is a lack of supply and rising home prices. That is keeping some potential buyers on the sideline.
“Purchase loan balances continued to climb, which is perhaps a sign that the still-weak job market and tighter credit for government loans are constraining some first-time homebuyers,” Kan said.
In Essex County, 30-year mortgages for borrowers with 20% down and a credit score of 720 or better are available at 3% with no points; 15-year loans with no points are 2.75%.
Please call me for an introduction.
Andrew Oliver
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.”
Mortgage demand remains strong
Total mortgage application volume fell 0.8% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Mortgage applications to purchase a home were 2% lower last week than the previous week but a strong 21% higher annually. Homebuyers are making up for lost time last spring and appear to have a new urgency to move due to the Covid-19 pandemic. Buyer demand for new construction is especially strong, as the supply of existing homes for sale continues to shrink.
Applications to refinance a home loan were basically flat, falling 0.4% for the week but were 121% higher than a year ago. Refinance demand has been riding high because mortgage rates keep falling. Even small rate moves open the field to more borrowers who can benefit and save much-needed cash on their monthly payments. (CNBC)
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
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
Weekly mortgage demand from homebuyers jumps even higher, up 19% annually
“Homebuyer demand is heating up with it. Add that to an already strong refinance market, and total mortgage application volume rose 4.1% last week from the previous week, according to the Mortgage Bankers Association.
Helping to fan demand were mortgage rates hovering near a record low.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $510,400 or less increased just barely to 3.20% from 3.19%. Points, including origination fee, increased to 0.35 from 0.33 for loans with a 20% down payment.”(CNBC)
“Mortgage applications increased last week despite mixed results from the various rates tracked in MBA’s survey,” said Joel Kan, an economist for the Mortgage Bankers Association. “The average 30-year fixed rate mortgage rose slightly to 3.20%, but some creditworthy borrowers are being offered rates even below 3%.”
As I have pointed out before, well-qualified buyers can now get 30-year mortgages at or even a little below 3%.
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
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
Mortgage rates dip below 3% – where to next?
In yesterday’s post I wrote that, over the last 15 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). With 10T yielding 0.62% that would imply a normalised FRM of 2.32%. But, as you may have noticed, these are not normal times.”
The vast amount of liquidity the Federal Reserve has pumped into the economy continues to sustain the stock market and has stabilized mortgage markets. Hence, we are seeing the spread referred to above come down from a high of 2.7% to the current 2.36%, still above historical levels.
What drives mortgage rates?
First, I will explain the link – or lack of link – between the Federal Funds rate (FF) and FRM – and what actually drives mortgage rates.
Five charts explain the factors driving mortgage rates. Mostly, the dates are those when the Fed has changed the FF over the last 5 years- 10 increases, followed by 5 decreases – plus two subsequent dates in 2020.
Fed Funds rate (FF)
The Fed Funds rate is the rate at which banks lend to each other overnight.
After increasing from 0% to 2.5% since late 2015, cuts in 2019 and 2020 have lowered the rate back down to 0.25%, following the dramatic and proactive cuts in March.
30-year Fixed Rate Mortgage (FRM)
The FRM reached nearly 5% in late 2018 and dropped to just below 3% for the first time this week.
10-year Treasury yield (10T)
The yield on the 10T is influenced by two major factors: the outlook for the economy (expanding businesses invest creating demand for money) and geopolitical events – the US dollar and US Treasuries are seen as a safe haven during times of uncertainty.
The yield reached 3.2% in November, 2018 (which was the time of the peak in the FRM), eased back under 2% in 2019 and then plummeted from 1.88% in early 2020 to just 0.58% in late April. It has mostly stayed in the 0.6-0.8% % range since then.
The spread, or difference, between FRM and FF
If there were a link between FF and FRM it would show up in this chart. In fact, the spread dropped from 3.7% in 2015 to 1.5% in 2019, increased to 3.26% in March and has since dropped back to 2.73%, demonstrating that there is no direct link between FF and FRM
The spread, or difference, between FRM and 10T
We see more consistency between FRM and 10T, where the spread was in a much tighter range of 1.5% to 1.8% until the second half of 2019 and into 2020.
Indeed, over the last several years the spread between FRM and 10T has been very stable averaging around 1.7%. But I would point out two things in this table: first, the spread widened significantly in the Great Recession in 2008; and, secondly, while the median spread for the year has been in a narrow range, within the years there have been quite wide variations – in particular look at 2008/2009 and again in 2020 where the spread has ranged from 1.8% to 2.7% – well above historic levels.
Comment
The FF rate affects the lending rate for credit cards, auto loans, adjustable rate mortgages, all of which are impacted by banks’ Prime Rates, which move with the FF rate. Fixed Rate Mortgages – the typical 30-year mortgage – have a longer life and their benchmark is the closest Treasury security, which is the 10T. Conventional mortgages are bundled and sold to investors, who require a risk premium – higher yield – over that offered by 10T.
As can be seen, that premium – spread – has been remarkable constant over recent years. It does fluctuate from time to time as the yield on 10T tends to move quickly at times – as we have seen this year – but in recent years it always comes back to around that 1.7% level.
Here are a few thoughts about the current situation:
1. While the economy has recovered many of the jobs lost during the early days of COVID-19, continuing unemployment claims are still a huge 17 million – and parts of the country are shutting down again.
2. It will not be known for some time how many business will not reopen or how many furloughed workers will face unemployment when their employers go out of business.
3. The country faces a consistent demand that it is time to do more than talk about the racism that still exists in so many ways. It is encouraging that so many major corporations have spoken our in recent weeks about the plans they are making to contribute to – and lead the way to – a more just society, And major groups in non-business areas are also speaking up.
Mortgage rates
As the last table showed, whereas over time the spread between FRM and 10T has been consistent in the 1.7% range, there have been wide variations in the short-term. We saw that in 2008 and 2009, a time of great economic duress when widespread buying of US Treasuries as a safe haven drove yields down and spreads widened. Those spreads returned to the norm as economic conditions improved.
The current economic situation is very different from the Great Recession. Indeed, but for COVID-19 the strength of the economy earlier in the year would have lead to expectations that the Fed would be increasing rates, rather than the dramatic cuts we saw.
Another factor is the demand for mortgage-backed securities (MBS), the bundles of mortgages sold to investors. In the Great Recession, investors were wary about the value of the underlying security – residential mortgages – and so demanded a larger premium.
Part of the reason that mortgage rates spiked initially in March was that investors stopped buying MBS as they were uncertain about the impact forbearance plans would have on mortgage interest payments. The MBS market recovered when the Fed stepped in as a buyer, but the uncertainties remain, leaving the Fed as the largest buyer of MBS.
In normal times I tell people to add 1.7% to the 10T yield to get an idea of where the FRM should be. But in 2008/09 and again in 2020 that formula was thrown off by extraordinary events, whether it be the Great Recession or COVID-19.
We are seeing signs of market stabilization with the spread between FRM and 10T dropping from a high of 2.72% to the current 2.36%, but it is still well above “normal” levels.
We are not going to see mortgage rates fall into line with the 10T + 1.7% formula (implying a FRM of 2.3%) again soon, because in times of economic stress the formula changes slightly to 10T +1.7% + a risk premium. Ideally, the spread would narrow as a result of rising yields on 10T as that would suggest that the economy is growing again. But there are too many unknowns to be able to guess when that may occur.
What we have seen is the start of a move, which may well be a longer-term trend, of people moving out of cities into the suburbs into larger houses with more open space around them (see article below). This is adding demand (from people selling higher-priced properties so more willing possibly to pay up) to a market suffering – in Essex County – from a 40% reduction in inventory compared with a year ago – when inventory was low anyway.
Goodbye Boston, Hello Marblehead
Accepted Offers held back by shortage of inventory
Are mortgage rates headed to 3%?
“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
www.TeamHarborside.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
Mortgage rates drop below 3%
Just over a year ago I published Are mortgage rates headed to 3%?.
Well, this week they dipped below 3%:
Will rates go even lower?
Maybe. I have written many times that 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). With 10T yielding 0.62% that would imply a normalised FRM of 2.32%. But, as you may have noticed, these are not normal times.
I will publish a fuller article tomorrow showing the historical links between FRM and 10T – and the other occasions when the spread has widened considerably.
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, 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
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
Mortgage rates hit yet another record low
“Mortgage demand got a lift from another big drop in mortgage rates. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 decreased to 3.19% from 3.26%. Points, including the origination fee, decreased to 0.33 from 0.35 for loans with a 20% down payment.
Applications to refinance a home loan, which are most sensitive to weekly rate moves, jumped 12% for the week and were 107% higher than a year ago. The refinance share of mortgage activity increased to 64.2% of total applications from 60.1% the previous week. Record low rates caused Fannie Mae to improve its housing outlook for the second half of this year.(CNBC)
“The continued decline in mortgage rates pushed up our refinance volume forecast by about $100 billion,.” said Doug Duncan, Fannie Mae’s chief economist. “At the current mortgage rate, we estimate that nearly 60% of all outstanding loan balances have at least a half-percentage point incentive to refinance.”
The biggest hurdles to homebuying today are lack of supply and rising prices, especially on the lower end of the market. The nation’s homebuilders are benefiting from that. Mortgage applications to purchase a newly built home were up over 50% in June annually. Builders, however, are struggling to keep up with the new demand, especially since they basically shut down their operations in March and April. (CNBC),
As I mentioned with last week’s release, buyers in our area with good credit and a minimum 20% deposit can find 30-year rates at or even a little under 3%. And 15-year rates as low as 2.5%.
Please call if you would like an introduction to a bank offering these low rates.
Inventory chronically low; demand booming
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, 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
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
Homebuyer mortgage demand spikes 33% as rates set another record low
“Mortgage applications to purchase a home rose 5% for the week and were a remarkable 33% higher than a year ago, according to the Mortgage Bankers Association’s index, which was seasonally adjusted, including for the Fourth of July holiday.
Buyer demand has been incredibly strong since mid-May, after the coronavirus shut down most housing activity in April. The only thing standing in the way of more sales is the record low supply of homes for sale.
Home prices gains continue to accelerate, so low mortgage rates are giving buyers much-needed help. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 dropped to 3.26% from 3.29%. Points, including the origination fee, for loans with a 20% down payment decreased to 0.35 from 0.36.”
“Mortgage rates declined to another record low as renewed fears of a coronavirus resurgence offset the impacts from a week of mostly positive economic data, such as June factory orders and payroll employment,” said Joel Kan, an MBA economist. “The average purchase loan size increased to $365,700 — also another high — as borrowers contend with limited supply and higher home prices.” (CNBC).
While this report states the average contract interest rate last week, nationally, was 3.26%, buyers with good credit and a 20% down payment can now find mortgages at or even a little under 3%.
Goodbye Boston, Hello Marblehead
Inventory chronically low; demand booming
“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
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