This morning FOMC announced no changes to the current Fed Funds rate (this is no surprise). The Fed has decided to keep the Fed Funds rate at 0 – 0.25% until the unemployment rate is under 6.5%. This may be some good news to home owners who have HELOCs as many of them have rates tied to the prime rate, which is based on the Fed Funds rate.
The Fed says….Mortgage Rates to Remain Low
December 12, 2012 by 1 Comment
The Fed Says…Let’s Twist
September 13, 2012 by Leave a Comment
No surprise that the FOMC is not making any changes to the Fed Funds rate. What may have surprised some is the Fed’s focus on trying to keep mortgage rates low with it’s purchase of mortgage backed securities. From today’s press release:
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
….If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities….
The efforts to keep mortgage rates low will be in contrast to the increase in the “g-fees” by Fannie Mae and Freddie Mac. It will be interesting to see how much of an impact the Feds efforts will make.
Stay tuned for Ben Bernanke’s press conference happening in a few hours. Meanwhile… let’s twist!
What may impact mortgage rates the week of September 10, 2012
September 10, 2012 by Leave a Comment
Although at first glance, this week may seem like there’s not a lot scheduled that may impact mortgage rates, what is scheduled is significant. We have the FOMC meeting winding up on Thursday following last Friday’s weaker than expected Jobs Report. Friday is packed with reports that may reveal signs of inflation, which tends to drive mortgage rates higher.
Here are some of the economic indicators scheduled for this week:
Thursday, Sept. 13: FOMC Meeting; Producer Price Index (PPI); Initial Jobless Claims
Friday, Sept. 14: Retail Sales; Consumer Price Index (CPI); Consumer Sentiment Index (UoM)
For your personal mortgage rate quote for your home located anywhere in Washington state, please contact me.
You can also follow me on Twitter or Facebook where I provide live rate quotes and mortgage tid-bits throughout the day.
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The Difference One Dollar Makes: Conforming vs Jumbo Rates
July 14, 2011 by Leave a Comment
This morning via Twitter, Talon Title asked me what the difference in rate is between a conforming and jumbo mortgage. Currently, as of October 1, 2011, the jumbo loan limit is set to be reduced unless Congress passes an extension. In the Seattle area, the loan amount for jumbos will be anything over $506,000 (currently the loan limit is $567,500) for a single family dwelling. Ben Bernanke has stated that private banking will step in to finance these borrowers needing a mortgage over the conforming loan amounts…this is at a price. He doesn't feel this will squeeze those borrowers out of the market. I wonder if this will squeeze more buyers into adjustable rate mortgages.
Here's the difference in rates based on current pricing (as of 8:30 a.m. on July 14, 2011) with 740+ credit and an 80% loan to value. We know the difference in the greater Seattle area between a jumbo and conforming rate will be $61,500 in down payment or equity.
Conforming loan amount of $417,000 or lower.
30 Year Fixed: 4.500% (apr 4.602).
5/1 ARM: 3.000% (apr 3.292). With 5/2/5 caps, this product is fixed at 3.000% for 60 months (P&I $1686) and then may adjust up 5% to 8.000% at the 61st payment (P&I $2744) or as low as 2.25% (P&I $1114). The rate will continue adjust up or down no more than 2% annually on the anniversary date and may never be higher than 8% or lower than 2.25%. Based on a $400,000 loan amount.
Conforming High Balance loan amount of $417,001 to $567,500 (for King County, Snohomish County or Pierce County).
30 Year Fixed: 4.625% (apr 4.602).
5/1 ARM: 3.875% (apr 3.912). With 5/2/5 caps, this product is fixed at 3.875% for 60 months (P&I $2379) and then may adjust up 5% to 8.875% at the 61st payment (P&I $3786) or as low as 2.75% (P&I $2102). The rate will continue adjust up or down no more than 2% annually on the anniversary date and may never be higher than 8.875% or lower than 2.75%. Based on a $506,000 loan amount.
5/1 ARM: 2.875% (apr 3.231). With 5/2/5 caps, this product is fixed at 2.875% for 60 months (P&I $2099) and then may adjust up 5% to 7.875% (P&I $3420)at the 61st payment or as low as 2.25% (P&I $1953). The rate will continue adjust up or down no more than 2% annually on the anniversary date and may never be higher than 7.875% or lower than 2.25%. NOTE: 5% additional down payment (75% LTV) is required for this scenario. Based on a $506,000 loan amount.
Non-Conforming – Jumbo loan amounts $567,501 and higher (until October 1, 2011).
30 Year Fixed: 5.250% (apr 5.371).
5/1 ARM: 3.875% (apr 3.904). With 5/2/5 caps, this product is fixed at 3.875% for 60 months (P&I $2669) and then may adjust up 5% to 8.875% at the 61st payment (P&I $4246) or as low as 2.75% (P&I $2358). The rate will continue adjust up or down no more than 2% annually on the anniversary date and may never be higher than 8.875% or lower than 2.75%. Based on a $567,501 loan amount.
Let's pretend that it's October 1, 2011 and that the changes to conforming loan limits are in place and somehow, mortgage rates are exactly the same as what I've quoted above.
The difference between the conforming high balance and jumbo rates are currently 0.625% in interest rate with the 30 year fixed mortgage. A loan amount of $506,001 or more (proposed future jumbo) would have a $193 higher mortgage payment with the jumbo rate over the conforming high balance based on rates above.
Are people going to stop buying homes that are in the current conforming high balance price range? I don't think so… I do think that when the conforming loan limits are reduced later this year, it will cause some to select mortgage programs they might not have considered such as adjustable rate mortgages or piggy-back second mortgages. It seems to me that Congress should allow the temporary higher loan limits to stay in place until housing becomes more stable. There was some discussion during testimony yesterday by Congressman Miller in California, however as I mentioned, Ben Bernanke doesn't seem to think that the reduction in loan limits will impact housing significantly. We'll know more in a few months…and don't forget, Fannie has issued "warnings" via their FAQs that we may see loan limits further reduced effective January 1, 2012.
Just for fun… since we're pretending to be in the future, here's a trip down 80s memory lane:
Ben Bernanke’s Testimony to Congress
July 13, 2011 by Leave a Comment
As I write this post, Fed Chairman Ben Bernanke is before the Financial Services committee of the House for the Semiannual Monetary Report to Congress.
From his prepared testimony:
"…the ongoing weakness in home values is holding down household wealth and weighing on consumer sentiment."
This is why I feel so strongly that the Home Affordable Refinance program (HARP) should not require appraisal for borrowers who qualify based on credit, income and employment. The home is already depreciated, why not allow the homeowner to reduce their mortgage payment and possibly prevent a foreclosure?
Case in point, one of my clients in Federal Way contacted me to refinance their home. They are being relocated out of state and are converting their existing home to a rental since selling it right now is not an option. They have a 5/1 ARM (set to adjust in 13 months) and are interested in a 7/1 ARM as they do not plan on retaining the home beyond 7 years. Their mortgage is securitized by Fannie Mae so they qualify for a Home Affordable refi which provides them a lower rate and allows higher loan-to-values (lower appraised values) for an investment property. With this proposed refinance, they are going to reduce their monthly mortgage payment by $389! That's more money in the economy and helps this family manage having a rental with their relocation scenario….then we receive the appraisal which comes in lower than anticipated.
Now my clients options are to (1) bring in cash to closing by reducing the loan amount to 95% of the appraised value (what's allowed with a HARP refi for investment properties) or (2) cancel the transaction. They elect to cancel. It just doesn't make sense to invest more in the home with the relocation especially with the timing of the relocation.
More from Bernanke's prepared testimony:
"Mortgage interest rates are near record lows, but access to mortgage credit continues to be constrained. Also, many potential homebuyers remain concerned about buying into a falling market, as weak demand for homes, the substantial backlog of vacant properties for sale, and the high proportion of distressed sales are keeping downward pressure on house prices."
Allowing Home Affordable refi's to be more like an FHA Streamline refinance by not requiring an appraisal would also help stabilize home values by preventing additional homes from becoming distressed.
These are highly qualified borrowers who want to keep their property (would prefer to sell but cannot) and who want to take advantage of low mortgage rates. It makes no sense to me that appraised values are factored in when the rest of transaction is strong.
This is a solution that could really help our housing recover.
Ben, the Fed and Mortgage Interest Rates [Live Post]
June 22, 2011 by Leave a Comment
Today the Fed will announce if they're going to change the Fed Funds rate. It's highly anticipated that they will leave the rate where it's currently at. What ever action the Fed takes does not directly change mortgage rates, however it does have a strong INFLUENCE on mortgage rates. Following the Fed's announcement, Ben Bernanke will be holding a press conference which may also impact mortgage rates. Remember, mortgage rates are based on mortgage backed securities (bonds) and inflation will drive mortgage rates higher.
This is a live post to illustrate how the Feds actions may impact mortgage rates, assuming the markets don't shrug off the information.
As of 9:00 am this morning, prior to the Fed's monetary decision and MBS (FNMA 30yr 4.00%) are up 34bps. What you and I probably relate to more than mortgage backed securities (MBS) are how this translates to mortgage rates.
I can lock in a 30 year fixed at 4.375% (based on the criteria I use for rate quotes) with a discount of 0.198% (apr 4.503).
5/1 ARM is currently at 2.875% (apr 3.256) with a discount of 0.043%. 5/1 ARM is fixed for 60 months and has caps of 5/2/5. The highest this rate can be at the 61st payment (or the life of the loan) is 7.875%.
11:10 am: we're minutes before Ben Bernanke's news conference. Mortgage rates that I've quoted are unchanged.
9:25 am: DOW is down about 7 points.
"No change" to interest rates is announced. The Feds Funds rate is unchanged at 0 – 0.25%. Good news to those who have home equity lines of credit which are based on the prime rate, they've dodged another bullet!
Initial reaction: markets seem unmoved. No real surprises in the FOMC press release.
9:31 am: Receiving an intraday rate sheet with pricing for the better from one of the lenders we work with. This lender did not have as competive pricing as what I quoted above (they're still far from it) as the began the day with worse pricing. The rate quotes above is still current pricing that I have available.
9:50 am: In just over an hour, we'll hear from Fed Head, Ben Bernanke. Stay tuned. I'll continue to share rate updates and updating this "live" post.
10:30 am: MBS down to session lows at 15bps for the 30yr.
11:10 am: minutes before Ben Bernanke's news conference and mortgage rates are unchanged from what I've quoted above. DOW is up 7.46.
12:15 pm: Ben Bernanke has wrapped up the news conference. MBS are up slightly to 22bps with the DOW down 32. Mortgage rates and pricing that I quoted above are unchanged.
I listened to as much of Bernanke's conferene as I could while I was work on my day job, originating mortgage on homes located in Washington. Some bits that I extracted (and shared on Twitter) are that Bernanke referred to the pace of unemployment being "frustratingly slow". During the Q&A he said that "we don't use words like "extended period" to be intentionally opaque, it means that we really don't know how long". Regarding housing, he commented that "those who can get credit, can buy a lot more house than they could a few years ago" referring to low rates and affordable home prices. He would like to see further efforts from mortgage servicers to modify loans when appropriate and to speed up the foreclosure process when appropriate.
DOW closes down 80.34.
This Week Could be a Doozie for Mortgage Interest Rates
April 25, 2011 by Leave a Comment
In the past, I've included the scheduled events that may impact mortgage interest rates in my rate weekly rate post. However, this week is so packed data that I thought it was worthy of a post all its own. Check this out (items that are bold tend to be the may be the most influential to rates):
Monday, April 25: New Home Sales
Tuesday, April 26: Consumer Confidence
Wednesday, April 27: FOMC Meeting and Durable Goods Orders
Thursday, April 28: Gross Domestic Product, Initial Jobless Claims, GDP Chain Deflator and Pending Home Sales.
Friday, April 29: Personal Consumption Expenditures and Core PCE, Employment Cost Index, Chicago PMI and Consumer Sentiment Index (UoM).
Wednesday, we'll learn if the Fed's interest rate decision and possibly gain clues as to their plans with QE2. Ben Bernanke is going to be having a news conference following the FOMC meeting which many will be tuned into hoping for clarity on his views of the direction of our economy. You can see the entire week offers plenty of data to be digested.
Remember, mortgage rates are based on mortgage backed securities (bonds) and are not set by the Fed. Mortgage rates may are impacted by how MBS are being traded on the bond markets. When the stock market is rallying or there are signs of inflation, mortgage rates tend to raise higher. When the stocks are tanking, investors will often seek the safety of bonds which will cause rates to move lower.
Whether or not you should lock or float (not lock) your interest rate depends on your personal risk tolerance. My general stance is that if you like the rate that is currently available – you should consider locking. Decide which scenario is worse for you: losing today's rate by not locking or locking todays rate with a rate drop tomorrow. Please discuss this with your local mortgage professional. I am a NMLS Licensed Mortgage Originator dedicated solely to Washington State. If you are interested in a mortgage for a home located anywhere in Washington State, I am happy to help you.
NOTE: I plan on posting mortgage interest rates today. Stay tuned!
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