Looking at this week’s report on mortgage rates and where rates have been in the past and where they may be headed in the future!
Saturday means it is time once again to check in on this week’s reports on mortgage rates!
Freddie Mac reported:
- 30-year fixed-rate mortgages averaged 4.71% with an average 0.4 point for the week
- This is down from last week when it averaged 4.72%
- Last year at this time, 30-year fixed-rate mortgages averaged 3.85%
- 15-year fixed-rate mortgages averaged 4.15% with an average 0.4 point
- This is down from last week when it averaged 4.16%
- Last year at this time, 30-year fixed-rate mortgages averaged 3.15%
Sam Khater, Freddie Mac’s chief economist, said:
Mortgage rates inched back a little in this week’s survey, easing 1 basis point to 4.71 percent after hitting a seven year high last week. There is upside risk to mortgage rates as the economy remains very robust and this is reflected in the very recent strength in the fixed income and equities markets.
However, the strength in the economy has failed to translate to gains in the housing market as higher mortgage rates have contributed to the decrease in home purchase applications, which are down from a year ago. With mortgage rates expected to track higher, it’s going to be a challenge for the housing market to regain momentum.
There is no doubt that rising mortgage rates and home prices could present a challenge. I used a chart above showing mortgage rates reported by Freddie going all the way back to 1998…
You should notice that mortgage rates have been much much higher in the past. Think about that when you hear someone complaining about rising mortgage rates.
Looking at mortgage rates by decade to get an even better idea of how good things are:
Some of these mortgage rates happened before many of today’s home buyers were born. But that does NOT change the fact that mortgage rates today are still super low!
The Mortgage Bankers Association reported:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.96% from 4.97%, with points increasing to 0.49 from 0.47 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) increased to its highest level since July 2011, 4.93%, from 4.92%, with points increasing to 0.31 from 0.30 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to its highest level since April 2010, 4.39%, from 4.38%, with points decreasing to 0.50 from 0.52 (including the origination fee) for 80 percent LTV loans.
We did not see much movement this week which should be a help to anyone looking to buy a home!
I know that many are concerned that rising mortgage rates will cause the housing market to slow down. But consider these 2 quotes in a recent Reuters article:
Ward McCarthy, chief economist at Jefferies & Co, said:
Higher interest rates is a headwind for housing, but it’s not a major obstacle right now.
Aaron Terrazas, senior economist at Zillow, said:
We need to see rates rise another 100 basis points to see a substantial drag.
Will we see mortgage rates rise to over 5%? Like I showed in the chart above, we have dealt with much higher rates in the past.
And we may have to deal with higher mortgage rates according to data from the latest Freddie Mac US Economic & Housing Marketing Outlook:
Nobody knows what the future holds but ignoring the projections of the mortgage rate experts could cost you lots of money!
Several positive reports this week on employment to cover!
- ADP reported that private sector employment increased by 230,000 jobs from August to September
- The DOL reported that the number of people filing for unemployment fell to a 48 year low
- The BLS reported that the unemployment rate declined to 3.7% and average hourly earnings increased 2.8%
All very good reports BUT this should motivate the Fed to increase their benchmark rate a 4th time this year. While the Fed does not directly set mortgage rates, this will increase the odds that mortgage rates will increase more.
There were quite a few other positive economic reports this week that all show the economy is doing pretty good despite the latest shenanigans in DC. At this point, it appears the greatest threat to the economy is coming from DC…
From The Conference Board:
The Conference Board Measure of CEO Confidence™, which had decreased slightly in the second quarter of 2018, declined again in the third quarter. The Measure now reads 55, down from 63 in the second quarter (a reading of more than 50 points reflects more positive than negative responses).
It appears that many CEOs are concerned as this measurement of their confidence hit the lowest level in 2 years. About 23% expect economic conditions to improve in the next 6 months compared to the 22% that think that economic conditions will get worse.
We will have to wait and see how this will play out…