Looking at the average rates reported by the FHFA, Freddie Mac, the MBA and Bankrate for the week of 6-28-2014 and all the news that will affect mortgage rates…
Good morning! Time to check what happened with mortgage rates this week by checking out the average rates reported by Freddie Mac, the MBA and Bankrate.com. Plus we also have the latest report from the FHFA and other economic news to discuss so let’s dive right in!
Earlier this week the FHFA released their latest report on mortgage rates. While not as up to date as the other reports I cover, it is good for a Big Picture view of where rates are, where they were and where they appear to be headed.
FHFA said that the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders index was 4.18% for loans closed in late May. The index is calculated using FHFA’s Monthly Interest Rate Survey. The contract rate on the composite of all mortgage loans was 4.13%, a decrease from 4.23% in April.
Most people “lock” their rates 30-45 days before a loan is closed. This means that FHFA’s May data actually shows us the mortgage rates from mid- to late-April. The effective interest rate was 4.28%, down 10 basis points from 4.38% in April. The effective interest rate accounts for the addition of initial fees and charges over the life of the mortgage.
FHFA’s interest rate survey shows the average interest rate on conventional, 30-year, fixed-rate mortgages of $417,000 or less was 4.37% in May, a decrease of 16 basis points. The average loan amount for all loans was $282,600 in May down $1,200 from $283,800 in April.
Check out the chart from FHFA:
Freddie Mac Reported:
- 30-year fixed rate mortgages averaged 4.14% with an average 0.5 point
- This is down from last week when it averaged 4.17%
- Last year at this time, 30-year fixed-rate mortgages averaged 4.46%
- 15-year fixed rate mortgages averaged 3.22% with an average 0.5 point
- This is down from last week when it averaged 3.30%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.50%
Freddie Mac also released theirs latest Multi-Indicator Market Index. Freddie Mac said:
Most housing markets remain weak despite declining mortgage delinquencies, improving local employment, house price gains and attractive mortgage rates due to weak home purchase mortgage applications.
Freddie Mac Deputy Chief Economist Len Kiefer said:
States like South Carolina, Rhode Island and Ohio have showed marked improvement since just the beginning of the year.
Freddie Mac Chief Economist Frank Nothaft said:
We’re seeing very slow improvement on the housing front with most markets still trying to move beyond stall speed.
The 30-year fixed rate mortgage fell 5 basis points to 4.28%
The 15-year fixed rate mortgage fell 5 basis points to 3.39%
The average rate for a 30-year jumbo mortgage fell 7 basis points to 4.31%
Bankrate.com said the bad GDP numbers were the cause of this week’s decrease in mortgage rates. More on that later…
The Mortgage Bankers Association Reported:
The average contract interest rate for 30-year fixed rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.33% from 4.36 %, with points decreasing to 0.18 from 0.24 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.28% from 4.32%, with points increasing to 0.12 from 0.09 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed rate mortgages decreased to 3.47% from 3.50%, with points increasing to 0.19 from 0.16 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
Despite the decrease in mortgage rates, the MBA reported that mortgage applications decreased 1% from one week earlier.
The Take Away:
Just last week I warned that if the economy improves, mortgage rates should rise. This week, we learned the latest GDP numbers were dismal.
Frank Nothaft, vice president and chief economist, Freddie Mac said:
Mortgage rates were down following the release of first quarter real GDP final estimate, which fell at a 2.9% annualized rate, a steeper than expected decline and the worst reading since the first quarter of 2009. Also, the seasonally-adjusted S&P/Case-Shiller 20-city home price index was up only 0.2% in April from the previous month. On a year-over-year basis, prices remained strong in April up 10.8 %, but slower than the 12.3% in March.
I must remind you that the S&P/Case-Shiller home price index tracks home prices for a big picture view. It is more for tracking home prices on a national level and is not the local information that home buyers / sellers need. For example, I share real estate market conditions for the Anderson area in my Weekly Real Estate Market Snapshots and Monthly Upstate SC Real Estate Market Reports basis.
The latest news that we can expect to affect mortgage rates include:
- GDP Shrank By the Most in 5 Years
- NAR’s Existing Home Sales increased 4.9%, the biggest gain since 2011
- New home sales increased 18.6% m/o/m, largest increase since January 1992
- Initial jobless claims fell
- Thomson Reuters/University of Michigan consumer confidence came in higher than expectations
- The American Chemistry Council’s Chemical Activity Barometer rose 0.5%
The decline in GDP is rather distressing. I think it may keep mortgage rates low for the time being.
More sales of both existing and new homes is good news for the economy. However, we are still much lower than where we need to be for a healthy housing market. I must point out you should look at the YOY numbers more than the MOM to really get a better idea of where the US housing market is headed. And ALWAYS look at your local market more than the national reports!
Jobless claims falling is great news but we still are a long way from what could be considered healthy employment numbers. Common sense tells us that people without jobs or that are concerned about losing their jobs are not buying homes. Still, this is still another positive sign for the economy.
The increase in consumer confidence is also good news. As people feel more confident, they will become more likely to spend money. More consumer spending should lead to more job creation. Which leads to more consumer spending. Kind of like which came first, the chicken or the egg.
The American Chemistry Council’s Chemical Activity Barometer may not be something you have heard of. It is a new one for me but if you think about it, this is an important economic indicator. The Chemical Activity Barometer is a leading economic indicator derived from a composite index of chemical industry activity. The chemical industry has been found to consistently lead the U.S. economy’s business cycle given its early position in the supply chain, and this barometer can be used to determine turning points and likely trends in the wider economy.
Other than the craptacular GDP number, we are seeing positive signs for the economy. Mortgage rates dropped this week because of the low GDP numbers for the first quarter of 2014. For the time being, I think rates will remain at the low level. Of course, I am talking about the average mortgage rates and NOT what is possible for YOU!
Finding out what is possible for you means talking to a lender. Talking to a lender is one of the most important steps you should take at the BEGINNING of the home buying process. You will NOT know what price range to look in, how much down payment and closing costs you need until you talk to a lender.
Looking at homes BEFORE you figure out the financial aspect is just wasting your time.
As always, I am providing this to you for informational purposes only! I am not a mortgage lender and you should contact the lender of your choice directly to learn more about its mortgage products and your eligibility for such products.