US mortgage rates remain low as spring buying season begins

US mortgage rates remain low at the start of the spring buying season, which is expected to encourage buyer demand.

According to Freddie Marc, a 30-year fixed-rate mortgage) averaged 3.59 per cent with an average 0.6 point for the week ending 21st April 2016, up from last week, when they averaged 3.58 per cent, but down from the 3.65 per cent recorded a year ago. A 15-year FRM this week averaged 2.85 per cent with an average 0.5 point, down from last week, when it averaged 2.86 per cent, and a year ago (2.92 per cent).

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.81 per cent this week with an average 0.5 point, down from last week and last year (both 2.84 per cent).

“Volatility in financial markets subsided over the past week, allowing Treasury yields to stabilize,” comments Sean Becketti, chief economist, Freddie Mac. “As a result, the 30-year mortgage rate was mostly flat, up only 1 basis point to 3.59 per cent. The release of March’s existing-home sales report, which shows monthly growth at 5.1 per cent, suggests homebuyers are taking advantage of low mortgage rates as the spring homebuying season gets underway.”

Indeed, the latest weekly figures from the Nortgage Bankers Association shows that mortgage applications increased 1.3 per cent in the week ending 15th April 2016, compared to one week earlier, while the refinance share of mortgage activity increased to 55.4 per cent of total applications from 54.9 per cent the previous week.

Despite the uncertainty surrounding interest rate hikes by the Federal Reserve, Freddie Mac forecasts a positive year ahead, with the labour market to sustain its momentum and the unemployment rate to drop back below 5 per cent for 2016 and 2017. Stronger economic growth is also projected for the remainder of 2016, with reduced slack in the labor market to drive wage gains above inflation, though the gains are likely to be modest.

On average, Freddie Mac expects house prices will rise by 4.8 and 3.5 per cent in 2016 and 2017 respectively, with rising home prices driving up homeowner equity.

“We’ve revised down our forecast for economic growth to reflect the recent data for the first quarter, but our outlook for the balance of the year remains modestly optimistic for the economy,” adds Becketti. “However, we maintain our positive view on housing. In fact, the declines in long-term interest rates that accompanied much of the recent news should increase mortgage market activity, particularly refinance.”

US mortgage applications fall

23rd March 2016

Cyndie

US mortgage applications fell this week, despite decreasing interest rates and a healthy start to the year.

According to the Mortgage Bankers Association, applications declined 3.3 per cent from one week earlier. Applications to purchase a home slipped 1 per cent week-on-week, although they were 25 per cent higher than a year ago – highlighting both the recovery the US real estate market has enjoyed since the financial crisis and the headwinds currently facing the country.

“There are fewer borrowers remaining who are able to benefit from low rates,” says MBA Vice President of Research and Economics Lynn Fisher.

“Last week, refinance activity fell to its lowest level since the end of January even though rates decreased slightly, and the average refinance loan size has fallen five weeks in a row… a feature of a declining refinance market.”

Borrowers with larger loan balances tend to be more rate sensitive, Fisher adds.

“As refinance applications surge, average loan size tends to go up. As we return to a more normal level of refinance applications, the mix of borrowers returns to normal and average loan size declines. Purchase activity remained well above the level observed a year ago.”

The FHA share of total applications increased to 11.8 percent from 11.7 percent the week prior. The VA share of total applications increased to 12.6 percent from 12.3 percent the week prior. The USDA share of total applications increased to 0.9 percent from 0.8 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.93 percent from 3.94 percent, with points decreasing to 0.35 from 0.42 (including origination fee) for 80 percent loan-to-value ratio loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 3.85 percent from 3.86 percent, with points decreasing to 0.27 from 0.28 (including origination fee) for 80 percent LTV loans.

The figures follow reports from the National Association of Realtors and others that the housing market in the US is expected to slow this year, as limited supply reduces affordability of homes.

 

US mortgage applications surge at start of 2016

14th January 2016

US mortgage applications surged at the start of 2016, as employment levels continue to improve.

Mortgage applications increased 21.3 per cent in the week ending 8th January from one week earlier, according to data from the Mortgage Bankers Association.

The growth arrived as the country adjusts to the Federal Reserve’s decision to raise interest rates in December 2015. Contrary to popular belief, though, the Fed does not determine mortgage rates, although it can have an effect upon them. Indeed, the average contract interest rate for 30-year fixed-rate mortgages decreased to 4.12 per cent from 4.20 per cent in January, while the average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.90 per cent from 3.95 per cent. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.42 per cent from 3.47 per cent.

Buyers were quick to take advantage of the still-low rates, with MBA’s purchase mortgage application index reaching its second highest level since May 2010 on a seasonally adjusted basis.

“Bolstered by strong fourth quarter growth in jobs and continuing low rates, the results are similar to levels we saw in early December, suggesting that the purchase market’s strong finish to 2015 may be continuing,” says Lynn Fisher, MBA’s Vice President of Research and Economics. “While refinances also increased on a holiday-adjusted basis, refinance activity was down 38 per cent relative to a year ago when rates dove below 4 per cent.

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