Posts Tagged ‘ Mortgage Rates Olympia Washington ’

What's Ahead For Mortgage Rates This Week : January 4, 2010

January 4, 2010
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Non-Farm Payrolls in focus this weekMortgage markets were relatively flat last week during holiday-shortened trading.  After starting the week with a Monday surge higher, mortgage rates settled down through Tuesday and remained somewhat flat into the early-close for New Year’s Eve.

However, as compared to the 4-month low posted post-Thanksgiving, conforming mortgage pricing has now worsened by more than 300 basis points.  In English, that means that a December 1 Washington mortgage rate quoted with zero points is available today at a cost of 3 points.

1 “point” is equal to 1 percent of how much you borrow.

If you were shopping for homes or rates last month, you no doubt noticed that pricing zoomed higher to close out 2009. How 2010 starts is anyone’s guess. This week will hold the answer.

It’s a week light with data, but heavy on importance.  The biggest news comes Friday in the form of the December employment report.

Last month, the Unemployment Rate fell for just the second time in 2 years and net job gains nearly turned positive.  Both points were bad for mortgage rates because a weak economy has helped keep rates down.  Evidence of improvement, therefore — at least according to Wall Street — is reason for reversal.

This month, analysts expect a net job gain of zero.  If they get it, the psychological effect of the data should cause stock markets to rise and mortgage markets to sink.

A worsening market is bad for rates.

Other data to watch this week is Tuesday’s Pending Home Sales report and Wednesday’s FOMC November Minutes release. Both can forcefully impact markets and rates.

Today is January 4 — there’s a lot of 2010 to go.  However, that won’t stop Wall Street from trying to figure it out. As the stock market rises and falls this week, the bond market will likely be in tow.  Abrupt movements mean changing mortgage rates and we’ll see more of our fair share of it over the next few weeks.

If you’re quoted a mortgage rate this week that fits your budget, consider locking it in.  Rates may fall in 2010, or they may not.  It’s a gamble on which you don’t want on the wrong side because when rates do rise, they’re likely to rise quickly.

Markets can’t sustain rates like this in an expanding economy.

What's Ahead For Mortgage Rates This Week : December 28, 2009

December 28, 2009
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Vacation weeks can lead to mortgage market volatilityMortgage markets made a 4-day losing streak last week on thin holiday volume and overall economic optimism. It was awful news for rate shoppers in Washington because mortgage rates were higher every day last week.

The holiday-shortened week marked the third out of 4 during which rates worsened and last week’s action happened to be especially harsh. Monday’s action was the worst for rates since July, for example. 

Tuesday’s was only slightly less worse.

Today, conforming, 30-year fixed mortgage rates have reached at a 15-week high — well off the lows set in early-December.

Normally, when mortgage markets worsen this badly, this quickly, it’s because of strong economic data, or growing inflationary expectations.  Last week saw neither.

Furthermore, consumer confidence didn’t rise as planned.

And yet — stock markets gained. All 10 sectors improved and they did so at the expense of mortgage bonds.

This week is again holiday-shortened so expect the same low-volume, high-volatility trading as last week.  There’s few data releases save for Tuesday’s Case-Shiller Index. Therefore, watch for momentum trading in either direction.

Markets close early Thursday and re-open Monday, January 4, 2010.  If you need to lock a rate, make sure of your loan officer’s hours.

Long-Term Mortgage Rates Inch Up To Just Over 5 Percent

December 24, 2009
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30-Year and 15-Year Rates Still at Incredibly Low Levels

McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.05 percent with an average 0.7 point for the week ending December 24, 2009, up from last week when it averaged 4.94 percent. Last year at this time, the 30-year FRM averaged 5.14 percent.

The 15-year FRM this week averaged 4.45 percent with an average 0.6 point, up from last week when it averaged 4.38 percent. A year ago at this time, the 15-year FRM averaged 4.91 percent.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.40 percent this week, with an average 0.6 point, up from last week when it averaged 4.37 percent. A year ago, the 5-year ARM averaged 5.49 percent.

The 1-year Treasury-indexed ARM averaged 4.38 percent this week with an average 0.6 point, up from last week when it averaged 4.34 percent. At this time last year, the 1-year ARM averaged 4.95 percent.  

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

“Although interest rates for 30-year fixed-rate mortgages are above 5 percent this week for the first time since the end of October, they are still around 0.5 percentage points below this year’s peak set in mid-June,” said Frank Nothaft, Freddie Mac vice president and chief economist. “ARM rates increased by a lesser amount as the market consensus calls for no rate hikes by the Federal Reserve in the immediate future.

“Meanwhile, the housing market continues to show improvement. Total existing home sales jumped 7.4 percent in November to an annualized pace of 6.54 million units, which was the most since February 2007. Moreover, the number of unsold existing homes was the lowest since December 2006 and the number of unsold new homes was the least since April 1971, which may leave future room for new construction.”

For a link to Freddie Mac’s recent article click here.

When It's A Holiday Week, Mortgage Rate Shoppers Should Be Extra Vigilant

December 22, 2009
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Vacation weeks can lead to mortgage market volatility

Mortgage pricing worsened Monday, driving mortgage rates to their highest levels since October.

The day’s action was drastic, too.

Some banks issued as many as 3 rate sheets Monday — each worse than the preceding and one reason why rates got so bad, so quickly, is because this week marks the beginning of mini-Vacation Season on Wall Street.

Between now and January 4, 2010, be prepared for big swings in pricing from day-to-day. Shopping for a mortgage could be a challenge.

The relationship between vacation days and mortgage rate volatility is rooted in how mortgage rates are “made”.

  1. Conforming mortgage rates are based on the price of mortgage-backed bonds, a security that is sold on Wall Street
  2. Mortgage-backed bonds can’t sell without a bond buyer and a bond seller agreeing to a specific sale price

So, during vacation week, when the total number of market participants are less, there are fewer opportunities for buyers and sellers to meet at a specific price. As a result, bond prices rise and fall with a higher velocity than on a “normal” day. Rallies and momentum plays are exaggerated, too.

Now, mortgage market action like this can work in your favor, or it could work out of your favor. Unfortunately, on Monday, rates moved out of favor.

This rest of this week is stacked with market-moving economic data. The data could be better-than-expected, or worse-than-expected. Either way, markets will react a little more feverishly than normal. Therefore, if you have a chance to lock a favorable rate, consider taking it.

Before long, the rate could be gone.

What's Ahead For Mortgage Rates This Week : December 21, 2009

December 21, 2009
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Fed Funds Rate (Dec 2006 - Dec 2009)Mortgage markets improved last week as pricing followed a roller coaster-like pattern. After touching a 6-week high Tuesday, rates rallied to weekly lows Thursday, and then jumped back higher Friday.

Despite the improvement last week overall, mortgage pricing remains significantly worse from the all-time lows set in late-November.

Oddly, last week’s most prominent mortgage-related story wasn’t the most influential one.

On Wednesday, the Federal Open Market Committee adjourned from a two-day meeting. It voted to leave the Fed Funds Rate unchanged from its current target zone of 0.000-0.250 percent. This wasn’t news, per se — markets expected the “no change” vote.

However, in its accompanying press release, the Fed appeared more rosy in its economic outlook, citing improving labor markets and low levels of inflation. Results like this are a mixed bag for rate shoppers, but is generally welcomed as good news.

Rates were unchanged after the FOMC release.

The bigger story last week comes from Greece.

Concerns for the country’s debt burden have been in play for weeks, but last week, Standard & Poor’s officially downgraded Greece’s debt rating. The move triggered concerns regarding broader Eurozone debt, especially considering the recent issues in Dubai.

U.S. mortgage markets benefitted from Greece’s troubles as “safe haven” attracted investors, driving down rates Thursday afternoon.

Debt concerns should remain in focus this week. Furthermore, there’s a bevy of domestic data that could swing rates in either direction, too. Most notably, watch for Tuesday’s housing data, Wednesday’s inflation data, and Thursday’s consumer confidence data. Each can be a powerful influence on rates.

There will be less volume on Wall Street because of Christmas and less volume tends to spur mortgage rate volatility. Be wary of swings in either direction.

Markets close early Thursday and will be closed Friday.

The Federal Reserve's Relationship To Mortgage Rates

December 15, 2009
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Interest rate spread between the 30-year fixed rate mortgage and Fed Funds Rate (2000-2009)The Federal Open Market Committee meets today for the last time in 2009. It’s a 2-day meeting and the Fed is expected to leave the Fed Funds Rate near 0.000 percent.

But that doesn’t mean mortgage rates won’t change.

See, a major misperception among the public is that the Federal Reserve sets mortgage rates. That’s false. Mortgage rates are based on the price of mortgage-backed bonds.

As an example, since 2000, the Fed Funds Rate and the 30-year fixed rate mortgage have been within 1 percent of each other at times, and as far apart as 5 percent at others.

If there was a direct relationship between the two, such a spread would be impossible.

The Federal Reserve doesn’t set mortgage rates. Wall Street does. However, whenever the Fed adjourns from its meetings, mortgage rates are susceptible to change.

For home buyers and rate shoppers, this week’s Fed meeting takes on added significance.

Over the last half-year, the Fed has used its post-meeting press releases to acknowledge an improving economy in which growth is tempered by job loss and tepid spending. In November, though, net job gains nearly went positive and Retail Sales data proved strong.

If the Fed gets more positive in its message tomorrow, mortgage rates will suffer. This is because Wall Street will use the Fed’s position on the economy as a reason to buy stocks. Some of the cash to fuel those buys will come from the mortgage bond market.

As extra bond supply hits Wall Street, mortgage rates go up.

Similarly, if the Fed’s message goes negative on the economy, investors are expected to sell their stock positions in favor of buying bonds. This makes rates go down.

So, the Federal Reserve doesn’t make mortgage rates, but it does exert an influence on them. In other words, rate shoppers would be wise to watch for the FOMC’s 2:15 PM adjournment. Even though the Fed Funds Rate is expected to remain unchanged, mortgage rates certainly are not.

What's Ahead For Mortgage Rates This Week : December 14, 2009

December 14, 2009
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The FOMC meets this week -- mortgage rates will be volatileMortgage markets worsened for a second consecutive week last week amid debt default concerns and stronger-than-expected economic data. Dollars left the bond market and mortgage rates suffered.

After re-reaching an all-time low December 1, mortgage rates have since rolled back to mid-November levels.

Rates are still low right now. Just not as low.

And meanwhile, last week’s big story — the one that should concern mortgage applicants between now and early-2010 — is the story of Retail Sales.

Last week, a government report showed that American consumers are spending more this holiday season than was expected. The Retail Sales data implies that consumers are feeling more confident in themselves, and in the economy overall.

This is one of the last remaining pieces in the economic recovery puzzle. Job growth, of course, is another, and both will be in focus this week as the Federal Open Market Committee meets for its final 2-day meeting of the year.

The FOMC isn’t expected to raise the Fed Funds Rate from its current “target range” near 0.000%, but when the FOMC adjourns at 2:15 PM Wednesday, its press release will dominate the news.

Specifically, watch for verbiage on the expected economic growth for 2010 because no matter what the Fed says, mortgage rates will be in flux. As one example:

  • If the Fed says inflation is under control, mortgage rates should fall
  • If the Fed says inflation pressures are growing, mortgage rates should rise

There’s other news this week, too, including PPI and CPI — 2 popular inflation gauges, plus some housing data, too.

If you need to lock a rate this week, it may be safer to lock prior to the FOMC’s adjournment. Given the recent strength in Retail Sales and the reports of “crowded malls” this past weekend, the Fed may choose to revise its growth estimates for the economy — a move that would be awful for mortgage rates.

Strong Retail Sales Data Could Lead To Higher Mortgage Rates In January

December 11, 2009
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Retail Sales Data November 2009If you wonder what mortgage rates and home affordability will look like next year, today’s Retail Sales data may hold your answer.

Versus October, November’s ex-auto sales were up by more than 1 percent. Analysts expected the increase, but not an increase of this magnitude.

“Ex-auto” means that motor vehicles and parts are excluded from the data.

Home values are increasing in many parts of the country and household net worths are rising, too. Therefore, we can infer from the Retail Sales report that U.S. consumers are starting to feel better about their individual finances, and about the economy overall.

To homebuyers and rate shoppers, strong Retail Sales data may foreshadow higher rates for mortgages ahead. This is because sales data is a by-product of consumer spending and consumer spending accounts for more than two-thirds of the economy.

As spending increases, the economy tends to expand, drawing investment dollars into stock markets and away from bond markets — including mortgage-backed bonds, the basis for conforming mortgage rates.

Less bond demand leads to higher rates and, therefore, lower levels of home affordability.

Despite the Holiday Season momentum, however, 2009 will likely mark just the second time that Retail Sales data fell year-over-year since the government started tracking it 40 years ago. The other year was 2008.

But, if November’s Retail Sales is a reliable indicator of consumer sentiment overall, we should expect 2010 to rebound strongly. And when it does, mortgage rates should suffer.

The housing market is recovering, mortgage rates are still near all-time lows, and the government is offering an $8,000 tax credit to qualified buyers through April 30, 2010. If you plan to buy a home next spring, you may want to consider moving up your timeframe. Waiting may be costly.

What's Ahead For Mortgage Rates This Week : December 7, 2009

December 7, 2009
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Unemployment Rate December 2006-November 2009Mortgage markets finally reversed course last week, selling off with fury and causing prices to plummet.

When bonds prices fall, rates rise.

The action broke a multi-week winning streak, much to the disappointment of rate shoppers everywhere. Rate hikes came in stages.

First, early in the week, mortgage bonds fell out of favor as traders booked profits ahead of the November jobs report and as concerns over a Dubai Default waned.

Then, on Friday, when the jobs report was ultimately released, it showed a net loss of just 11,000 jobs in November and dip in the Unemployment Rate to 10.0 percent.

Mortgage markets got hit again.

Now, since bottoming last Monday, mortgage pricing is worse by more than 100 basis points. As that figure relates to rates, it’s a jump of anywhere from a quarter- to a half-percent.

Last week was a bad week to not be locked in. Unfortunately, this week may not be much better.

Without much data due for release, momentum should lead mortgage rates higher. Amid a few confidence surveys and a speech by Fed Chairman Bernanke, the biggest news on the week will be Friday’s Retail Sales report.

Retail Sales matters to mortgage rates because consumer spending accounts for two-thirds of the economy. And now, with jobs data looking stronger, Retail Sales are expected to show a modest increase versus last month.

If the data comes in better-than-expected, mortgage rates should rise — much like they did on the jobs data. On the other hand, if the data is weak, expect rates to retreat.

So far this season, Holiday Shopping has been mixed.

Mortgage rates tend to rise faster than they fall so if your homebuying or refinance needs are immediate, it may be prudent to lock your rate rather than to wait and see what happens with the economy and this week’s momentum.

Despite getting worse last week, mortgage rates are still very low.

Falling Unemployment Rate Leads To Higher Mortgage Rates Today

December 4, 2009
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Non-Farm Payrolls November 2009This morning’s jobs report is causing mortgage rates to rise, capping a week during which rates have already jumped 3/8 percent off all-time lows.

The government’s November Non-Farm Payrolls report reinforced the notion that the recession is nearly over, if not over already.

Just 11,000 jobs were lost last month — much fewer than analysts had expected — as the Unemployment Rate fell to 10.0%.

If it seems strange to be talking economic recovery while Americans are still losing jobs — 7.2 million since 2008 — remember that data always needs context.

See, analysts view employment figures as a lagging indicator for the economy. This is because business owners tend to make hiring decisions based on how business has been — not on how it will be at some point in the future.

The jobs report rarely reflects the “right now”. As an example, job loss peaked in January 2009 — 4 months after the height of the financial crisis.

We saw the same pattern during the Recession of 2001.

According to government data, during the last recession, job loss peaked in October 2001 but the recession ended the very next month. It wasn’t until October 2002 that employment went net positive on a monthly basis.

And this is why investors are cheering November’s jobs report. Better-than-expected numbers and a falling Unemployment Rate show that the economy is improving.

Unfortunately for rate shoppers, better-than-expected data is pushing mortgage rates higher. Rates are expected to open 0.250% higher versus yesterday’s close.