Discussing the latest on mortgage rates, home buyer misconceptions, Wells Fargo accused of more naughty tricks, home builder confidence and much more…
Mortgage applications increased 2.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 9, 2017. Last week’s results included an adjustment for the Memorial Day holiday.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to 4.13% from 4.14%, with points increasing to 0.35 from 0.34 (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 $424,100) decreased to 4.06% from 4.08%, with points increasing to 0.24 from 0.21 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.37% from 3.39%, with points decreasing to 0.34 from 0.43 (including the origination fee) for 80 percent LTV loans.
Good news! Of course, we have to wait to see how things turn out after the Fed’s decision to raise their rate.
The MBA also reported this week that mortgage applications for new home purchases in May 2017 increased 15% compared to May 2016. Compared to April 2017, applications increased by 4% relative to the previous month.
- 30-year fixed-rate mortgages averaged 3.91% with an average 0.5 point
- This is up from last week when it averaged 3.89%
- Last year at this time, 30-year fixed-rate mortgages averaged 3.54%
- 15-year fixed-rate mortgages averaged 3.18% with an average 0.5 point
- This is up from last week when it averaged 3.16%
- Last year at this time, 15-year fixed-rate mortgages averaged 2.81%
Remain calm because as you just read, the MBA reported decreasing mortgage rates. Plus these are the average rates and may not reflect what is realistic or possible for you. Also you need to think about the down payment as well as the mortgage rates…
Majority of Home Buyers Wrong About the Down Payment Needed to Buy a Home
In an interesting survey carried out by Genworth Financial Inc. at the Annual Mortgage Bankers’ Association Secondary Market Conference, mortgage professionals said that first-time home buyers continue to think they need a 20% down payment to purchase a home.
Almost 40% of the mortgage professionals interviewed think that a lack of understanding about home buying is preventing some people from buying a home. Saving the down payment is frequently mentioned as the main reason that stops people from buying a home.
Sadly, thinking you need a 20% down payment to buy a home could delay you becoming a home owner by several years! Check out the biggest misconceptions from the study:
Rohit Gupta, CEO of Genworth Mortgage Insurance said:
While first-time homebuyers continue to drive the purchase market, we believe many are staying on the sidelines due to the misconception that a 20 percent down payment is required to secure a mortgage.
There are various low down payment options available today that allow prospective homebuyers to reach their dreams of homeownership sooner. It is crucial that, as an industry, we proactively educate eligible borrowers about solutions that will enable them to buy a home when they’re ready.
Please don’t let these misconceptions stop or delay you from buying a home! You need to sit down with a mortgage professional and discuss your budget, goals, financial situation and options.
You could be pleasantly surprised!
Even as Wells Fargo was reeling from a major scandal in its consumer bank last year, officials in the company’s mortgage business were putting through unauthorized changes to home loans held by customers in bankruptcy, a new class action and other lawsuits contend.
The changes, which surprised the customers, typically lowered their monthly loan payments, which would seem to benefit borrowers, particularly those in bankruptcy. But deep in the details was this fact: Wells Fargo’s changes would extend the terms of borrowers’ loans by decades, meaning they would have monthly payments for far longer and would ultimately owe the bank much more.
Really? What was Wells Fargo thinking?
In the week ending June 10, the advance figure for seasonally adjusted initial claims was 237,000, a decrease of 8,000 from the previous week’s unrevised level of 245,000. The 4-week moving average was 243,000, an increase of 1,000 from the previous week’s unrevised average of 242,000.
Remember the 4-week moving average is the number to watch as it is less “noisy”. Applications for unemployment benefits have been below 300,000 for 119 straight weeks. That is the longest such stretch for claims below 300,000 since 1970.
Home builder confidence in the market for newly-built single-family homes weakened slightly in June. It is down slightly from the level in May according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
Despite the slight decrease NAHB Chairman Granger MacDonald said that builder confidence levels have remained consistently sound this year. He explained this is a reflection of the ongoing gradual recovery of the housing market.
The bad news is that we once again heard that builders are still having problems finding skilled workers and buildable lots.
Highlights from the FOMC statement:
Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending has picked up in recent months, and business fixed investment has continued to expand. On a 12-month basis, inflation has declined recently and, like the measure excluding food and energy prices, is running somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term. Near term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.
In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.
We will have to wait and see if this leads to mortgage rates increasing. I suggest touching base with your lender ASAP. I did read one article that said we can expect a short term increase in mortgage rates just like the 2 previous increases.
The decision to raise rates was not a surprise and the Fed even mentioned starting to decrease their holdings of bonds and other securities. They started buying bonds after the financial crisis to keep rates low and to keep the economy from imploding.
The Fed said they plan to start gradually decreasing its balance sheet. The Fed did not specify the overall size of the reduction or exactly when they would start.