2009 has clearly been a good year for mortgage rates and homeowner, mortgage lenders and brokers have all benefitted from the Federal Reserve’s commitment to lower interest rates.Which direction will the mortgage rates go from here is anyone’s guess.
Home mortgage rates remain low as the Federal Reserve continues to make moves to keep them that way. Freddie Mac’s weekly rate report says thirty-year fixed-rate mortgages fell to an average 4.82%, down from 4.86 % last week. A year ago, thirty-year mortgages were averaging about 6%.
Long-term fixed rate mortgage loans are now on par with many adjustable rate mortgages. A one year ARM also averaged 4.82% this week. “Long-term fixed-rate mortgage rates have remained below 5% for the past ten weeks as the U.S. Treasury and Federal Reserve act to keep interest rates low through security purchases,” says Freddie Mac chief economist Frank Nothaft. “The treasury purchased $136 billion in mortgage-backed securities through April and the Fed bought $740 billion through mid-May.”
The Federal Reserve has also purchased $115 billion in Treasury bonds since March. Homebuilder confidence rose this month, according to the National Home Builders Association, despite a drop in housing starts. The decline in construction was led primarily by a continued drop in condo and apartment construction.
The Mortgage Bankers Association also reported this week a continued rise in home loan applications, led by refinancing activity.Mortgage refinancing now accounts for 74 % of all mortgage applications.
Low mortgage interest rates continued this week amid mixed reports about the slowing economy, Freddie Mac’s chief economist said on Thursday.According to Freddie Mac chief economist Frank Nothaft, “Both the core producer price and consumer price indexes ticked up in January, higher than the market consensus, while consumer confidence in February dropped to the lowest reading since records began in January 1967,” said, in a news release. FHA mortgage rates remain low with 5.625% average on thirty year fixed rate home loans.
Thirty-year fixed-rate mortgages averaged 5.07% for the week ending February 26, up from last week’s 5.04% average but still lower than their 6.24% average a year ago, according to Freddie Mac’s weekly survey of conventional rates. Meanwhile, fifteen-year fixed-rate home loans averaged 4.68%, unchanged from last week and down from 5.72% a year ago.
5-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.06% this week, up from 5.04% last week; the ARMs averaged 5.43% a year ago. 1-year Treasury-indexed ARMs averaged 4.81% this week, up slightly from 4.80% last week; the ARMs averaged 5.11% a year ago.To obtain current mortgage rates, the fixed interest mortgage loans and the 5-year ARM required payment of an average 0.7 point, while the 1-year ARM required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.
In the news release Nothaft said “Reductions in home prices and affordable mortgage rates have yet to spur housing demand.” You can see how new sale prices continued to decline home. “For instance, house prices declined by 8.7% for the twelve months ending in December 2008 and were down 10.9% from their highs set in April of 2007, according to the Federal Housing Finance Agency’s purchase-only monthly home price index.
Now that President Barack Obama’s $787 Billion Economic Stimulus Bill has been signed into law and will take effect on March 4, many American homeowners are anxiously wondering how this bill may affect the housing market and possible mortgage relief. Despite primarily focusing on bolstering the economy by creating jobs and reviving spending, the bill includes steps to revitalize this critically important segment of the American economy. But what impact will the stimulus package directly have on your mortgage?
President Obama’s financial resue plan, named the American Recovery and Reinvestment Act, is designed to address two groups of homeowners: those who are current on payments but have high mortgage rates and not enough equity to qualify for a mortgage refinance loan, and those who are at risk of losing their homes to foreclosure.
Watch Obama’s Radio Address 01-31-09
The mortgage rescue plan also intends to provide $200 billion in additional financial backing to Fannie Mae and Freddie Mac to increase money available for home lending.These steps will directly help homeowners and new home buyers seeking a new mortgage, says Michael Isaacs, president and CEO of Residential Finance Corporation a national mortgage lender specializing in FHA refinances. “The stimulus package aims to make money more readily available for lenders to help those who are currently in need,” says Isaacs. “The American Recovery and Reinvestment Act will directly help those seeking to refinance out of bad mortgages as well as those looking to become homeowners for the first time.”
In a recent article, Barry Habib, CEO of the Mortgage Market Guide talks about the challenges mortgage lenders and brokers have with their clients after the Federal Reserve lowers key rates. Mortgage lenders in every state report similar challenges after Fed meetings. Claudio Pereida, a mortgage broker in Orange County said, “every time the Fed lowers the rates, my clients call me and expect their mortgage in process to have the rate reduced.” He continued, “locked or unlocked borrowers really believe that if the Fed lowers interest rates that their rate showed be dropped as well.” He tries to explain to them that it doesn’t work that way but the customers seem to feel that they aren’t being treated fairly. Many refinancing borrowers call their loan officer and demand a rate reduction. Many patient homeowners are perplexed as to why mortgage refinancing rates have not dropped during Fed’s last six rate cuts.
According to Bryan Dornan, a mortgage banker from California, “In most cases, the home lenders anticipate the Fed cutting the rate and actually lower the rates prior to the Federal Reserve meeting and announcing the key rate discounting.” This can be challenging to explain to borrowers who have watched a three point reduction by the Federal Reserve yet have no positive effect on mortgage rates for refinancing purposes. How many mortgage lenders and brokers out there have lost borrowers with loans in process for similar issues?
The Federal Reserve meets today to discuss the economy and key interest rates that significantly affect credit and mortgage rates. It is widely anticipated that the Fed leave the key interest rates at 2%, which would keep the prime-lending rate for consumers at 5%. The Federal Reserve has signaled that its next move on interest rates is likely a hike but when the Fed changes directions remains unclear. Several Maryland FHA Mortgage Lenders indicated in a recent article that, rate and term refinancing has declined for conventional loans but has increased slightly for FHA streamline refinance loans.According to Drew Mchale, “FHA streamline business is very volatile, because if the interest rates rise at all, then borrowers typically back out of the loan, because the benefits disappear.”
Charles Plosser, president of the Federal Reserve Bank of Philadelphia, last month said the Fed probably will need to boost rates “sooner rather than later” even if employment and financial conditions haven’t revived. Richard Fisher, president of the Federal Reserve Bank of Dallas, opposed the Fed’s decision in June to leave mortgage rates unchanged. He said he preferred a rate increase then to fend off inflation. Mortgage lenders eagerly await the Fed’s next moves.
