February 23, 2012

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What’s Ahead For Mortgage Rates This Week

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Existing home sales Mortgage markets worsened last week on renewed optimism from the Eurozone, additional evidence of a U.S. economic recovery, and ongoing strength in housing.

The action sparked a stock market rally at the expense of mortgage bonds, sending conforming and FHA mortgage rates meaningfully higher for the first time in more than 2 months.

Markets closed early Friday and remained closed Monday. When they re-open today, conforming mortgage rates will already have bounced off last week’s new, all-time lows.

As reported by Freddie Mac’s weekly mortgage rate survey, the average 30-year fixed rate mortgage fell to 3.91 percent nationwide, with an accompanying 0.7 discount points plus closing costs. 1 discount point is equal to 1 percent of your loan size such that 1 discount point on a $100,000 loan is equal to $1,000.

It’s not just the conventional 30-year fixed that made new lows last week, either. All of Freddie Mac’s reported rates fell to new, all-time lows.

  • 30-year fixed : 3.91% with 0.7 discount points
  • 15-year fixed : 3.21% with 0.8 discount points
  • 5-year ARM : 2.85% with 0.6 discount points

These rates are no longer valid, however. FHA mortgage rates rose slightly last week, too.

This week, mortgage rates will be more volatile than usual. There isn’t much economic data on which to trade, and it’s a holiday-shortened week (again). Look for geopolitics and momentum to nudge markets forward, therefore — a potentially bad combination for today’s rate shoppers. There is very little room for mortgage rates to fall, but lots of room for them to rise.

If the stock market rallies to close 2011, mortgage rates will rise right on with it.

For now, rates remain historically low. If you’ve been shopping for a mortgage — waiting for rates to fall — this last week of the year may be your last chance at sub-4 percent, fixed-rate mortgage rates. Don’t wait too long or you might miss it.

It’s a good time to execute on a rate lock. Now only if the inventory for Phoenix small multifamily properties would increase so there would be something to buy.

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A Look At The Recent Federal Reserve Statement

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Putting the FOMC statement in plain EnglishTuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

The vote was nearly unanimous for the second straight month. Just one FOMC member dissented in the vote, favoring additional policy stimulus beyond what the Federal Reserve currently provides.

In its press release, the Federal Reserve sais that the the U.S. economy is improving, noting that since its November 2011 meeting, the economy has been “expanding moderately”. The Fed also added that domestic growth is occurring despite some “apparent slowing in global growth” — a nod to ongoing uncertainty within the Eurozone.

The Federal Reserve expects a moderate pace of growth over the next few quarters, and believes that the jobs market will continue to improve, but slowly.

Other potential soft spots within the economy include :

  1. A slowdown in business investment
  2. A “depressed” housing market
  3. Strains in global financial markets

The Federal Reserve added no new policies at its December meeting, and made no changes to existing ones. It re-iterated its plan to leave the Fed Funds Rate within its current range of 0.000-0.250 percent “at least until mid-2013″ and re-affirmed “Operation Twist” — the stimulus program through which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.

Mortgage bonds are mostly unchanged since the Fed’s announcement, giving mortgage rates in Phoenix little reason to rise or fall.

Mortgage rates remain near all-time lows and, for homeowners willing to pay points + closing costs, 30-year fixed rate mortgages can be locked at less than 4 percent. If you’re thinking of buying or refinancing a home, it’s a good time to lock a mortgage rate.

The FOMC’s next meeting will be its first scheduled meeting of the new year. The meeting is slated for January 24-25, 2012.

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What’s Ahead For Mortgage Rates In Mid December

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Mortgage markets were mostly unchanged for the 6th consecutive week last week as Wall Street’s uncertainty regarding the future of U.S. and global economies remain.

Mortgage bonds made gains made through the early part of the week, which caused mortgage rates in Arizona to drop Monday through Wednesday afternoon. Those gains were erased, however, as 23 of 27 Euro leaders reached agreement on fiscal coordination and budget planning, sparking optimism for the future of the Eurozone, in general.

Investment Mortgage rates rose Thursday and Friday.

This week, the momentum may continue. The main story we’ll be watching is the Federal Open Market Committee’s Tuesday meeting — its 8th scheduled meeting of the year and its last until 2012.

When the Fed meets, mortgage rates are often volatile.

At its meeting, the FOMC is expected to vote the Fed Funds Rate unchanged within its current range near zero percent. However, it won’t be the Fed’s vote on the Fed Funds Rate that changes markets. Wall Street is keyed in to two other elements, instead.

The first element is the verbiage of the FOMC’s press release to markets. Issued upon adjournment, the FOMC’s press release identifies strengths and weaknesses in the U.S. economy, and offers an outlook for the future plus potential threats. The “tone” of the press release can change how mortgage bonds trade.

If the Fed describes an economy in recovery with few threat to growth, mortgage rates are likely to rise post-FOMC. By contrast, if the Fed says the economy has slowed, mortgage rates should fall.

The second element on which Wall Street is focused is the likelihood of new, Fed-led economic stimulus. Should the Federal Reserve modify existing support programs, or introduce new ones, income property mortgage rates are sure to shift. Unfortunately, we can’t know in which direction — it will depend on the size of the program and its expected impact on the U.S. economy.

The Fed adjourns Tuesday at 2:15 PM ET.

Beyond the Fed, there is other rate-moving news, too, including Tuesday’s Retail Sales report, Thursday’s Producer Price Index, and Friday’s Consumer Price Index. Each has the capacity to change mortgage rates throughout Phoenix so if you’re floating a mortgage rate, it may be a good time to lock one in.

Freddie Mac reports the average 30-year fixed rate mortgage at 3.99% with 0.7 discount points, plus closing costs.

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