US mortgage rates rise for first time in 2017

US mortgage rates have risen for the first time in 2017, according to Freddie Mac.

The lender’s latest market report reveals that the 10-year Treasury yield increased more than 10 basis points last week, while the 30-year mortgage rate moved up as well to 4.19 per cent, a 10 basis point jump – the first increase in the mortgage rate since the end of December.

The 30-year fixed-rate mortgage (FRM) now averages 4.19 per cent with an average 0.4 point, up from last week when it averaged 4.09 percent and a year ago, when it averaged 3.79 per cent.

These rises are expected to continue throughout the year, as the Federal Reserve raises its base rate multiple times

“With rising interest rates, we expect mortgage origination volumes to decline in 2017 relative to 2016 and origination volume to stabilize at a lower level in 2018,” says Freddie Mac. “The decline in overall mortgage activity will be driven by a sharp reduction in refinance activity, which we forecast to fall more than 50 percent from about $1 trillion in 2016 to about $425 billion in 2017.”

“If long-term interest rates rise as we forecast, we may begin to see borrowers choose adjustable-rate mortgage (ARM) products,” adds the lender.

The rise in mortgage rates will add costs to the purchase of US real estate, although with supply at its lowest level since 1999, according to the National Association of Realtors, house prices are forecast to climb in the coming year, regardless of how mortgage rates perform.


US mortgage rates hit two-year high

3rd January 2017

US mortgage rates reached a two-year high at the end of 2016, buoyed by the Federal Reserve’s decision to raise interest rates.

The Fed Reserve’s decision, announced in December, was a sign of the growing economic confidence in the USA, bolstered by the election of Donald Trump as the country’s next President, who has spoken since about plans to increase spending significantly.

In the week ending 22nd December, as a result, Freddie Mac reports that the 30-year fixed-rate mortgage (FRM) averaged 4.30 percent with an average 0.5 point, up from the previous week when it averaged 4.16 percent. A year ago at that time, the 30-year FRM averaged 3.96 percent.

Sean Becketti, chief economist, Freddie Mac, comments: “A week after the only rate hike of 2016, the mortgage industry digested the Fed’s decision and this week’s survey reflects that response. Following Yellen’s speech last Wednesday, the 10-year Treasury yield rose approximately 10 basis points. The 30-year mortgage rate rose 14 basis points to 4.30 percent, reaching highs we have not seen since April 2014.”

Following that, average fixed mortgage rates moved higher again for the ninth consecutive week.

The figures mark an end to the era of record low mortgages for US home buyers. Indeed, despite the recent jump in mortgage rates since the election, the annual average for the 30-year fixed-rate mortgage was 3.65 per cent in 2016 overall, the lowest annual average ever recorded in the Freddie Mac PMMS going back to 1971.

According to the National Association of Realtors, buyers are now racing to beat the mortgage rate hike, as affordability threatens to decline in 2017. Mortgage applications increased 2.5 per cent in the week ending 16th December, according to the Mortgage Bankers Association.


US mortgage rates to stay below 5 per cent in 2017

20th December 2016

US mortgage rates are predicted to climb in the coming year, but will not rise above 5 per cent.

The era of record low mortgage rates is thought to be over, following the election of President Donald Trump. Indeed, with economic confidence bolstered by the President-elect’s spending plans, the Federal Reserve raised interest rates for only the second time since the global financial crisis this month. Mortgage rates have been rising too, with Zillow reporting the average 30-year fixed conforming mortgage rate as jumping 55 basis points since the presidential vote to 3.91 per cent, nearing the highest rates recorded since early 2015.

According to the Mortgage Bankers Association, rates will continue to rise in the coming years.

“In the December forecast, we have adjusted the path of interest rates upwards a bit more quickly in 2017 reflecting the fact that the recent rate increase following the election has been sustained,” says the MBA’s latest forecast.

“Strong household formation coupled with further job growth, rising wages and continuing home price appreciation will drive strong growth in purchase originations in the coming years,” adds MBA Chief Economist Michael Fratantoni.

While borrowers have continued borrowing, though, new figures from the MBA show that mortgage applications decreased 4 per cent from one week earlier, in the week ending 9th December. On an unadjusted basis, the MBA’s weekly index decreased 5 per cent compared with the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to its highest level since October 2014, 4.28 percent, from 4.27 percent, with points decreasing to 0.36 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

However, experts agree that rates will not surge too quickly.

“Mortgage rates will increase, but not by much,” says Redfin, which expects the 30-year fixed mortgage rate to climb, but “no higher than 4.3 per cent” in 2017.

“Wall Street’s optimism for economic growth and inflation in 2017 is expected to keep mortgage rates low,” adds the site’s forecast.


US mortgage rates keep rising, but borrowers keep borrowing

13th December 2016

US mortgage rates are climbing, but borrowers keep on borrowing.

Mortgage rates have surged after Donald Trump’s presidential win, rising to the highest levels seen since July 2015. Despite the largest weekly rate increase since 2013, purchase mortgage requests on Zillow have maintained their pre-election activity, indicating that borrowers are moving forward with their plans to purchase amid the rising interest rates.

Potential homebuyers may be feeling a sense of urgency to lock in a mortgage before rates move even higher, as financial markets widely expect the US Federal Reserve to raise its policy interest rate by a quarter of a percentage point during its Federal Open Market Committee (FOMC) meeting tomorrow. The outcome of this meeting will influence the mortgage bond market, which, in turn, will likely impact current mortgage rates for US borrowers. This rate hike would mark the first central bank move this year and only the second increase since 2006.

According to mortgage rates on Zillow, the average 30-year fixed conforming mortgage rate has jumped 55 basis points since the presidential vote, to 3.91 percent, and today is holding near the highest rates recorded since early 2015.

“While those looking to buy a home are understandably concerned about the path of rates ahead, it’s important to remember that borrowing costs remain exceptionally low by historical standards,” says Erin Lantz, vice president of mortgages for Zillow Group. “Rising rates may impact the location or size of the home they hope to purchase, but buyers that are fully committed to buying a home are unlikely to be swayed by the FOMC’s decision to raise rates.”


US mortgage rates rise following Trump win

28th November 2016

US mortgage rates continue to climb, following Trump’s presidential election win.

Despite a dip in the dollar’s value in the immediate aftermath of the election result, the sentiment in the American economy is broadly upbeat, as Trump’s rhetoric has moderated and the consensus is that the president-elect will cut taxes and boost spending on infrastructure, both things that could boost inflation. Indeed, the Federal Reserve said last week that there was a possibility that interest rates could be increased once again by the end of the year.

Mortgage rates are therefore rising too, with the Morgage Bankers Association revealing that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to its highest level since January 2016 – 4.16 percent, from 3.95 percent. The average 30-year fixed-rate for mortgages with a value over $417,000 increased to its highest since January 2016 – 4.04 percent, from 3.89 percent.

Mortgage applications also increased 5.5 per cent last week, according to the MBA.

“Mortgage rates have continued to move higher in the post-election period, as investors worldwide are looking for increases in growth and inflation, with the 30-year mortgage rate reaching its highest weekly average since the beginning of 2016,” says Michael Fratantoni, Chief Economist and Senior Vice President of Research & Technology at the Mortgage Bankers Association. “Refinance volume dropped further over the week, particularly for refinances of FHA and VA loans. Purchase volume increased sharply for the week compared to both last week, which included the Veteran’s Day holiday, and last year, with purchase volume up more than 11 percent on a year over year basis. The increase in purchase activity was driven by borrowers seeking larger loans and that drove up the average loan amount on home purchase applications to $310 thousand, the highest in the survey, which dates back to 1990.”


Multifamily lending surges in US

2nd November 2016

Multifamily lending in the USA surged 28 per cent last year, according to new figures, setting a new record.

In 2015, 2,855 different multifamily lenders provided a total of $249.8 billion in new mortgages for apartment buildings with five or more units, according to the Mortgage Bankers Association. 63 per cent of the active lenders made five or fewer multifamily loans over the course of the year.

“Demand for mortgages was driven by strong property fundamentals, increasing property values, a robust transaction market and low interest rates,” says Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “Supply of mortgage capital came through record levels of lending by banks, Fannie Mae, Freddie Mac and life insurance companies. As we look at 2016 and 2017, those factors appear to remain in place.”

The MBA report is based on its surveys of the larger multifamily lenders and the recently released Home Mortgage Disclosure Act (HMDA) data that covers multifamily loans made by many smaller lenders, particularly commercial banks.

The $249.8 billion of multifamily mortgages originated in 2015 went to a variety of investors. By dollar volume, the greatest share (35 percent of the total) went to commercial bank, thrift and credit union portfolios. The top five multifamily lenders in 2015 by dollar volume were JP Morgan Chase and Company, Wells Fargo, Berkadia, CBRE Capital Markets, Inc., and Walker & Dunlop.

The surge in multifamily lending arrives as mortgage activity in the US increases in general, fuelled by low rates that have made it possible for domestic buyers to get on the housing ladder, as well as making property opportunities more attractive to investors.


US mortgage rates hit four-month high… and are still near record lows

26th October 2016

US mortgage rates have risen to their highest level in four months, but are still near record lows.

The latest Primary Mortgage Market Survey from Freddie Mac highlights just how low mortgage rates in the USA have become in the last year, as US mortgage rates rise to their highest level in four months, but still remain still near record lows.

The 30-year fixed-rate mortgage moved a solid 5 basis points to 3.52 per cent last week, while the 10-year Treasury yield remained relatively flat. This is the first week in over 4 months that rates have risen above 3.50 percent. This month, mortgage rates seem to be catching up to Treasury yields and returning to pre-Brexit levels.

30-year fixed-rate mortgage (FRM) averaged 3.52 per cent with an average 0.5 point for the week ending 20th October, up from the previous week when they averaged 3.47 per cent. A year ago at this time, the 30-year FRM averaged 3.79 per cent.

15-year FRM this week averaged 2.79 per cent with an average 0.5 point, up from the previous week when they averaged 2.76 percent. A year ago at this time, the 15-year FRM averaged 2.98 percent.

Borrowers may still pay closing costs which are not included in the survey, such as commitment rates, but the low figures underscore the affordable financing that is available for those purchasing in the USA.

Indeed, the low mortgage rates have been a key drive of the housing market’s recovery, making it possible for domestic buyers to get on the housing ladder, as well as making prices more attractive to investors. The recovery’s momentum shows no signs of stopping, with Freddie Mac’s separate research highlight the continued improvement made by housing markets across the country. In August, the lender’s Multi-Indicator Market Index (MiMi) found that three new states (Indiana, Alabama and New Jersey) reached historic landmarks of housing activity.

On a year-on-year basis, the index improved by 5.44 per cent. Since its all-time low in October 2010, it has rebounded 43 per cent, although its 85.7 score remains significantly off its high of 121.7.

The most improving states month-on-month were Nevada (up 2.95 per cent), Florida (2.14 per cent), Illinois (1.95 per cent), Washington (1.91 per cent) and Alabama (1.90 per cent). On a year-on-year basis, the most improving states were Florida (12.13 per cent), Massachusetts (9.94 per cent), Nevada (9.94 per cent), Oregon (9.43 per cent) and Tennessee (9.39 per cent).

“Housing markets are on track for their best year in a decade,” says Freddie Mac Deputy Chief Economist Len Kiefer. “The MiMi purchase applications indicator is up over 18 per cent from last year and is at its highest level since December 2007.”

The South continues to show some of the biggest improvements, especially in Florida. MiMi’s purchase applications indicator is up more than 30 per cent in Florida compared to last year. Meanwhile, in the West, the battle between low mortgage rates and rising house prices continues.

“So far, low mortgage rates have helped on the affordability front, but in hot markets like Denver, Fresno, Provo and Los Angeles it’s becoming increasingly difficult for the typical family to afford a median price home,” adds Kiefer.


US mortgage rates still at record lows

6th June 2016

Mortgage rates in the USA remain at record lows, despite rising three weeks in a row.

According to Freddie Mac, the average 30-year fixed-rate mortgage rose to 3.66 per cent from 3.64 per cent last week. Even with a third consecutive weekly rise, though, the rate remains below the 3.87 per cent it was at a year ago, with rates still near three-year lows.

Rates have remained below 4 per cent in 16 of the past 17 months. Now, they are beginning to climb on the back of America’s improving economy. Indeed, the Federal Reserve raised the base rate at the end of last year, buoyed by the favourable economic outlook. Since then, the Fed has stepped back from pushing ahead with further hikes, but an increase is looking increasingly likely.

Speaking last week, Federal Reserve Chair Janet Yellen said it would “probably” be appropriate for the Fed to hike rates “in the coming months”. While that would not directly set mortgage rates, the base rate for federal funds is used by banks to borrow from one another, which can, in turn, push up mortgage rates for consumers.

Lawrence Yun, Chief Economist for the National Association of Realtors, comments: “Along with rent growth, rising gas prices — and the fading effects of last year’s cheap oil on consumer prices — could edge up inflation and push [mortgage] rates higher.”

For now, Yun forecasts mortgage rates will hover around 4 per cent in coming months, but inflation could potentially surprise the market and cause rates to increase suddenly.

Nonetheless, the record low rates mean that conditions will stay favourable for some time.

“Even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices during their search,” adds Yun.