Mortgage Rates

Higher Rates Could Derail The Plans Of Many Buyers

February 13, 2018 by admin

Many Pundits Predict 5% Rates By Year’s End

Mortgage rates ended last week at a 4 year high, and are poised to move even higher. The timing could not be worse, as the usually busy spring housing market kicked into gear early this year amid higher home prices and strong competition for a record low supply of homes for sale.

The average rate on the popular 30-year fixed is now right around 4.5% , still low when looking historically, but buyers over the past six years become accustomed to rates in the sub 4% range. Mortgage rates last hit 5% back in 2011.

A 5% rate would cause more than a quarter of today’s home buyers to slow their plans, according to a Redfin survey of 4,000 consumers at the end of last year. Just 6% said they would drop their plans to buy altogether. About one-fifth of consumers said 5% rates would cause them to move with more urgency to purchase a home, fearing rates would rise even further. Another fifth said they would consider more affordable areas or just buy a smaller home.

Unlike during the last housing bubble in the mid 2000s, mortgage lenders today are required by new regulations to examine potential borrowers with greater scrutiny. Higher mortgage rates may mean some borrowers on the margins will not qualify for the size of the loan they need or want.

Wallingford PA Real Estate – Wallingford, PA 19086

How Are Mortgage Interest Rates Determined?

November 18, 2014 by admin

What is behind the daily fluctuations of mortgage interest rates? When you are shopping for a mortgage it is important to understand the basic influences of mortgage rates and how they are determined. Mortgage rates are generally offered in eighths, so you’d see 4%, 4.125%, 4.25%, 4.375%, and so forth. There are two main components that determine your mortgage rate. The first is the market rate for mortgages, and the second is your individual financial situation.

Mortgage rates are closely tied to the yield on the 10-year Treasury bond. In general, people tend to refinance their mortgages, or sell their homes and buy new homes, in 10-year cycles. You can expect to see cycles of seven to 10 years for mortgages, so the 10-year Treasury bond is a pretty good measure if you want an idea of what’s happening.

If the yield goes up on 10-year Treasury bonds, then mortgage rates are likely to move higher. Likewise, if bond yields move lower, mortgage rates are likely to head lower as well. A good rule of thumb is to expect a 1.60% to 1.80% spread between the yield on 10-year Treasury bonds and mortgage rates.

This means that if the 10-year Treasury yield is at 2.4%, you can expect to see mortgage rates at right around 4.0% to 4.25%. The rate will never be completely predictable but you can get a general idea of which way mortgage rates are likely to head by looking at Treasury yields.

If bond yields increase mortgage rates increase, if bond yields decrease mortgage rates decrease.

Economic activity: One of the biggest factors in what happens with mortgage rates is economic activity. We get a lot of economic measures, from readings of the Consumer Price Index, to measures of Gross Domestic Product, to information about Consumer Confidence. All of these measures influence mortgage rates.

Basically, when the economy is in good shape, demand for mortgages increases, and interest rates move higher in response, since incentive to encourage people to buy homes isn’t needed as much. When the economy slows down, mortgage rates drop as lenders try to attract borrowers.

Mortgage rates are also shaped by such events as Federal Reserve Policy Announcements, the state of the housing market, and regional mortgage activity.

Your Personal Financial Picture

The ultimate influence on whether you pay the best available rate, or whether you are charged more, is your own financial situation.

Lenders take a look at your individual situation and use that to determine whether or not you will get the best possible rate, as determined by the market, or whether you will pay more. If you are seen as a bigger risk, you will pay a higher interest rate for your loan, since the lender is taking on a bigger risk that you will default on the loan. Here are some of the factors in your personal situation that impact your mortgage rate:

Your credit score: This is a three-digit summary of your financial reputation. Your credit score represents your ability to handle credit. If you have a higher score, the lender thinks it is likely that you will repay your loan, and is more willing to charge you a lower rate.

Loan term: The longer your loan term, the bigger the chance that you will default. If you choose a shorter loan term, and a faster payoff, you will be rewarded with a lower interest rate.

Down payment: You pay less when you have more of an equity interest in the property. The more you can put down for your down payment, the more you are likely to save in terms of interest. A 20% down payment will most likely result a lower mortgage rate.

Points paid: You can also pay points in an effort to reduce your mortgage rate. You can pay money up front, and see a reduction. A point represents 1% of your home’s purchase price. For each point you pay, you can expect to see a reduction of about 1/8 of your loan rate. So, if you are buying a home for $200,000, one point is $2,000. If your loan rate is quoted at 4%, you can get it down to 3.875% by paying that $2,000. Pay two points ($4,000) up front, and you could see it drop to 3.75%.

The determination of what interest rate an individual borrower will pay is subject to a number of factors, and it is always wise to speak to several lenders to shop for the best rate available.

Wallingford PA Real Estate – Wallingford, PA 19086

Rising Mortgage Rates – Keeping A Historical Perspective

July 24, 2013 by admin

Wallingford PA Real Estate - Wallingford PA - 10 Year History - 30 Year Fixed Mortgage Rates

Interest Rates During The Decade Past – Freddie Mac

As mortgage rates have risen in the past few weeks on the heels of the Fed’s announcement regarding the scaling back of their bond repurchasing efforts, there has been concern about the impact on the gradually recovering housing market.

While it is true that rising rates will probably always have some negative impact on the market, it is important to look at rates in a historical perspective. Rates remain very attractive when compared to the past decade, with Freddie Mac reporting an average rate of 4.37% as of July 18.

Record low rates over the past year did not produce any dramatic recovery, and it has been predicted that even with rates expected to reach the 5% mark later this year, such an increase will not hamper the market’s recovery.

Wallingford PA Real Estate – Wallingford, PA 19086

Mortgage Rates At Lowest Level In 50 Years

August 24, 2011 by admin

Freddie Mac released the results of its Primary Mortgage Market Survey® showing mortgage rates, fixed and adjustable, reaching all-time record lows. The 30-year fixed averaged 4.15 percent, breaking the previous record low of 4.17 percent set November 11, 2010.

According to the survey, 30-year fixed-rate mortgage (FRM) averaged 4.15 percent with an average 0.7 point for the week ending August 18, 2011, down from the last week when it averaged 4.32 percent. Last year at this time, the 30-year FRM averaged 4.42 percent.

Additionally, 15-year FRM averaged 3.36 percent with an average 0.6 point, down from last week when it averaged 3.50 percent. A year ago at this time, the 15-year FRM averaged 3.90 percent.

Results also showed that the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.08, with an average 0.5 point, down from the previous week when it averaged 3.13 percent. A year ago, the 5-year ARM averaged 3.56 percent.

The one-year Treasury-indexed ARM averaged 2.86 percent with an average 0.6 point, down from the last week when it averaged 2.89 percent. At this time last year, the 1-year ARM averaged 3.53 percent.

Thirty year fixed mortgage rates are now the lowest in over 50 years. In comparison, the Bureau of Economic Analysis estimated the average effective mortgage rate was about 5.3 percent on single-family loans outstanding during the second quarter of 2011.

The environment of ultra low mortgage rates, lower home prices, and abundant inventory combine to make this an attractive time to buy a home.

Average Interest Rates Top 5%

January 3, 2011 by admin

: Rate Trend – 9/29/10 To 12/29/10

The average national rate for 30 year mortgages has risen to 5.02%, according to www.bankrate.com, who conducts weekly national surveys of the top 10 markets. The average 30 year loan also carries on average, 0.44% discount and origination points.

Rates have risen steadily for several months, as demonstrated by the accompanying chart. Check out additional mortgage information and discussion in the Mortgage Corner.

S. Clark Kendus