Fixed Mortgage
Rates Unchanged
Date: June 23, 2011
WASHINGTON, D.C. -- Fixed mortgage rates were mostly unchanged this week, hovering near yearly lows. The average rate on the 30-year loan held steady at 4.50 percent, Freddie Mac said Thursday. It hit 4.49 percent two weeks ago, the lowest level this year. The average rate on the 15-year fixed mortgage, popular for refinancing, inched up to 3.69 percent. Last week it reached a yearly low of 3.67 percent. Rates typically track the yield on the 10-year Treasury note. That yield has been dropping in recent weeks based on weak data that points to a slower economy.
Low mortgage rates and falling home prices have done little to boost the troubled housing markets. Tougher lending standards and bigger down payment requirements have prevented many people from taking advantage of the ultra-low rates. Many people who can qualify are holding off, worried that prices have yet to bottom out.
Fewer people purchased previously occupied homes in May. Sales fell to their lowest level of the year. Since the housing market went bust in 2006, sales have fallen in four of the past five years and hit a 13-year low last year. New-home sales fell last month to a seasonally adjusted annual rate of 319,000 homes. That's far below the 700,000 homes per year that economists say must be sold to sustain a healthy housing market.
Federal Reserve Chairman Ben Bernanke said Wednesday that the housing market is dragging down the broader economy. For the market to recover, he said foreclosures must be cleared from the pipeline of homes for sale. Most economists say home prices will keep falling through the rest of the year. Many forecasts don't anticipate a rebound in prices until at least 2013.
To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day. The average rate on a five-year adjustable rate mortgage fell from 3.27 percent to 3.25 percent, the lowest rate on records dating back to 2005. The average rate on a one-year adjustable-rate loan rose to 2.99 percent, slightly above the record low of 2.95 percent. The rates do not include the extra fees known as points. One point is equal to 1 percent of the total loan amount.
The average fees rose to 0.8 percent from 0.7 percent for the 30-year fixed loan, according to Freddie Mac's survey. They were flat at 0.7 percent for the 15-year fixed loan, the survey found. The average fees for the five-year and one-year ARM were unchanged at 0.6 percent and 0.5 percent, respectively.
Mortgage rates
level off
at 2011 lows
Date: June 17, 2011
California - Mortgage rates leveled off this week at or near their lows for the year after declining for eight consecutive weeks, Freddie Mac said in releasing the results of its latest Primary Mortgage Market Survey. Low rates appear to have sparked interest in both refinancing and home purchases, according to a separate survey of loan applications conducted by the Mortgage Bankers Association. Freddie Mac's survey showed rates on 30-year fixed-rate mortgages, which last week hit a low for the year of 4.49 percent, averaging 4.5 percent with an average 0.7 point for the week ending June 16.
Rates on 30-year fixed-rate mortgages hit an all-time low in Freddie Mac records dating to 1971 of 4.17 percent during the week ending Nov. 11, 2010, before rebounding to their 2011 high of 5.05 percent in February.
Rates on 15-year fixed-rate mortgages averaged 3.67 percent with an average 0.7 point -- a new 2011 low, but essentially unchanged from 3.68 percent last week.
Rates on 15-year mortgages hit an all-time low in records dating back to 1991 of 3.57 percent in November. At this time last year, 15-year loans were averaging 4.2 percent.
For 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 3.27 percent with an average 0.6 point, down from 3.28 percent last week and 3.89 percent a year ago. That's a new 2011 low, and not far off the all-time low in records dating to 2005 of 3.25 percent seen in November.
Rates on 1-year Treasury-indexed ARMs averaged 2.97 percent with an average 0.5 point, up from last week's 2010 low of 2.95 percent. At this time last year, the 1-year ARM averaged 3.82 percent.
Looking back a week, a separate survey by the MBA showed demand for purchase loans was up a seasonally adjusted 4.5 percent during the week ending June 10 compared to a week earlier and 6.1 percent from a year ago. Requests to refinance still accounted for 70 percent of applications, however, with refinance applications up 16.5 percent from the previous week. Demand for re-financings was still down 28 percent from November, when mortgage rates hit all-time lows. Borrowers with an incentive to refinance remain constrained from doing so by lack of equity in their homes, said MBA chief economist Michael Fratantoni in a statement. In a May 18 forecast, MBA economists said they expect rates on 30-year fixed-rate mortgages to rise to an average of 5.5 percent during the final three months of this year and average of 5.9 percent during the fourth quarter of 2012.
Mortgage rates!
Published: 7:01 p.m. Saturday, July 10, 2010
An odd scene has been playing out lately in the offices of mortgage brokers and bankers around the country. Mortgage rates have sunk to levels not seen in more than a half-century — a seductive 4.57 percent for an average 30-year fixed loan. Yet brokers and lenders report not a flood but a trickle of customers. So what's going on?
Call it a tale of the haves and have-nots.
The haves are those who stand to save money from refinancing and have the financial wherewithal to do so. Mortgage rates have been low for so long that most of them already have refinanced in the past 18 months. Doing so again wouldn't be worth the cost for most.
The have-nots? Those are the millions of Americans pummeled by the housing collapse. They have little or no home equity or no money for down payments. Or they lack the credit or steady income to get or refinance a mortgage.
The result is that brokers like Ginny Ferguson are filling their days doing something other than handling a stampede of customers buying homes or refinancing. Ferguson, CEO of Heritage Valley Mortgage in Pleasanton Calif., has managed to stay busy: She's archiving files, reviewing marketing plans and calling previous clients and agents to try to drum up business. "Am I sitting around playing solitaire on my computer? No," she says.
The 4.57 percent average for a 30-year fixed-rate loan last week was the lowest on records that mortgage company Freddie Mac has kept since 1971. The last time rates were lower was the 1950s, when most long-term home loans lasted just 20 or 25 years. Under normal circumstances, 4.57 percent would be irresistible.
A decade ago, if you'd told David Christensen, owner of Mountain Lake Mortgage in Lakeside, Mont., that rates would drop this low, he wouldn't have believed you. And if rates did somehow fall this far, he never thought he would lack for customers, as he does now.
Yet both have come true.
Christensen argues that mortgage lending standards have tightened so much since the financial crisis that many people with decent but not-stellar credit can't qualify. Lenders are demanding stronger credit scores and higher down payments or home equity.
"The pendulum has swung too far the other way," Christensen said. "It needs to come back to the middle."
Chokehold on credit
Overall lending has ticked up in recent weeks, driven by borrowers looking to refinance. But it remains only about half the level of early 2009.
Stricter lending rules aren't the only factors behind the restrained demand. A tax credit for homebuyers that helped lift home sales expired April 30. The result is that fewer people are taking out loans to buy homes.
And some borrowers who do have good credit and solid jobs are still being rejected for refinanced loans. It's because their homes are worth less than they owe on their mortgage. They're "under water," in real estate parlance. About a quarter of American households with a mortgage are in this predicament.
Blame the housing bust. It shrank home values and depleted home equity.
Most people in the lending industry say lending standards were far too lax during the boom. Yet these days, some brokers recall the boom times with a tinge of nostalgia. Buyers and refinancers were everywhere. And yet rates were higher than they are now.
In the summer of 2005, lending activity was about 30 percent more than it is today. And homebuyers and refinancers had to pay about a full percentage point more for a mortgage than today's 4.57 percent.
"If the money was as easy as it was three or four years ago, I'd be the richest guy in town," says Joe Bell, a mortgage broker and real estate agent in St. Petersburg, Fla.
Now?
"The phone rings a lot, but a lot of people can't qualify."
Opportunity glut
Part of the problem is that people have been able to receive mortgage rates of less than 5 percent at several points over the past 15 months. For them, spending thousands on fees to take out a new loan wouldn't make sense.
For many of the homeowners who refinanced over the past two years, rates would need to drop to nearly 4 percent for refinancing to be financially worthwhile, said Patrick Cunningham of Home Savings and Trust Mortgage in Fairfax, Va.
"We're turning down a number of people for every one person that we can get through," Cunningham says. "That part is frustrating for us, certainly. I would say it's even more frustrating for the consumer."
The drop in rates this spring and summer has been a surprise. Mortgage rates had been expected to rise after the Federal Reserve ended its program to lower rates by buying up mortgage-backed securities.
At the start of April, rates started to rise. Good economic news had caused long-term U.S. Treasury bonds, a haven during the recession, to lose some appeal. As demand for Treasurys fell, their yields rose. And so did mortgage rates, which track the yields on long-term Treasurys.
But then several European countries fell into crisis over their debt burdens. Investors rushed back into the safety of Treasury bonds. That drove down Treasury yields — and mortgage rates.
Savings — at a cost
The costs of refinancing are generally considered worthwhile for homeowners who can shave at least three-quarters of a percentage point off their rate and plan to stay in their homes for several years.
For mortgage lenders and brokers, refinancing clients are generally people with excellent credit, stable jobs and plenty of equity in their homes.
People like Chris O'Donnell, 43, of Centreville, Va.
He and his wife are on track to close their refinanced loan this month. They are pulling money out to buy a new heating and air conditioning system for a home they bought last year.
But they're able to do so only because they had put down 50 percent of the purchase price when they bought the home. Few can afford to do that.
O'Donnell is shaving his mortgage rate by about half a percentage point to just over 4.6 percent. He'll save about $100 a month on payments. But he notes the main reason he can do that is the economy's feeble state.
"It's good for us," he said. "But it scares the heck out of me for the economy."
Haves
They stand to save from refinancing and have the financial wherewithal to do so. But because mortgage rates have been low for so long, most of them already have refinanced. Doing so again wouldn't be worth the cost for most.
Have-nots
They are the millions of Americans pummeled by the housing collapse. They have little or no home equity or no money for down payments. Or they lack the credit or steady income to get or refinance a mortgage.
Glossary of Terms
"Foreclosure (FC) sale": a sale of a property that occurs while the property is actively in some stage of foreclosure. (Stages include "NOD" for notice of default, "LIS" for lis penden, "NTS" for notice of trustee's sale, "NFS" for notice (judgment) of foreclosure sale, and "REO" for real estate owned or bank-owned property.) This definition of foreclosure sale includes only sales to third-party buyers or investors not involved in the foreclosure process. It does not include property transfers from the owner in default to the foreclosing bank or lender.
"REO sale": a sale of a property that occurs while the property is actively bank-owned (REO).
"Preforeclosure sale": a sale of a property that occurs while the property is actively in default (NOD, LIS) or scheduled for foreclosure auction (NTS, NFS).
"Pct. of all sales": total share of foreclosure sales (or preforeclosure sales or REO sales) among all residential sales during the quarter or year.
"Avg. FC sales price": the average sales price of foreclosure sales (or preforeclosure sales or REO sales) during the quarter or year, excluding sales with no sales price.
"Avg. FC discount": the percentage difference between the average sales price of foreclosure sales and the average sales price of nonforeclosure sales during the quarter or year. In order to come up with the discount, RealtyTrac takes the sale price and divides it by the number of square feet in the home, to come up with the average price per square foot. Then it parses the numbers by property (those not in foreclosure, those in foreclosure, and those which have already been repossessed by the banks). Comparing the average cost per square foot gives RealtyTrac the discount rates. The company doesn't take into account the condition of the property or the type of property (i.e. a condo vs. a detached home).
"Avg. REO discount": the percentage difference between the average sales price of REO sales and the average sales price of nonforeclosure sales during the quarter or year.
"Avg. preforeclosure discount": the percentage difference between the average sales price of preforeclosure sales and the average sales price of nonforeclosure sales during the quarter or year.
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