Rates continued their post-election climb last week. For the week ending December 1, Freddie Mac announced that 30-year fixed rates rose to 4.08% from 4.03% the week before. The average for 15-year loans increased to 3.34%, and the average for five-year adjustables moved up to 3.15%. A year ago, 30-year fixed rates were at 3.93%, approximately 1/8% lower than today’s levels. Attributed to Sean Becketti, Chief Economist, Freddie Mac — “The 10-year Treasury yield remained flat despite an upward revision to third quarter GDP. The rate on 30-year fixed home loans rose 5 basis points to 4.08 percent, rising a total of 51 basis points in three short weeks. With rates at the highest we’ve seen this year; borrowers are moving more slowly on refinances. The latest Weekly Applications Survey results from the Mortgage Bankers Association show refinance activity down 16 percent week over week.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
ABBA First Mortgage News
When borrowers compare the payments using MI to payments using a second mortgage, many times the factor of MI cancellation is left out. For example, perhaps the choice is between a second mortgage and MI. And perhaps the client obtains the home below market value, is going to renovate the home, and/or is going to be paying down principal rapidly. In these situations, did you know that MI could be cancelled in as little as two to five years, while the client could be paying on the second for a considerably longer time?
In addition, the second may be subject to payment changes in the future, if the loan has an adjustable rate. Even convenience can be a factor, as many homeowners would prefer making one payment each month. Thus, while one alternative may have a higher payment in the short-run, choosing the wrong option may cost a client thousands of dollars in the long-run.Please compare MI options carefully. ABBA First can help you by supplying the factors that you’ll need to make an educated decision.
Housing giant Freddie Mac plans to dispense with traditional appraisals on some loan applications for home purchases, replacing them with an alternative valuation system that would be free of charge to both lenders and borrowers. The company confirmed that it could begin the no-appraisal concept as early as next spring. Instead of using professional appraisers, Freddie plans to tap into what it says is a vast trove of data it has assembled on millions of existing houses nationwide, supplement that with additional, unspecified information related to valuation, and use the results in its assessments of applications.
For consumers, the company believes, this could not only eliminate appraisal expenses — which typically range from $350 to $600 or more — but could cut down on current closing delays attributable to appraisals. It also could relieve lenders of their current burdens of responsibility for the accuracy of appraisals — a major sore point with banks that sell loans to Freddie subject to potential “buy back” demands if significant errors are later found in appraisals.
Source: The Nation’s Housing, Ken Harney
Even though there are technical indicators that say bonds should improve, that’s not a guarantee of anything. Bonds are still under pressure, which means rates and pricing are also under pressure. The good news is that we’re not losing ground in giant chunks like we have been over the last few weeks. The bad news is that we’re also not really in a position to see things improve. Floating is at best a coin flip to pick up a little bit of pricing, and it’s just too much risk.
30-year mortgage rates have jumped to 3.94 percent versus 3.54 percent at the start of the month. According to the Commerce Department, New Home Sales declined 1.9 percent last month, but increased 17.8 percent compared to a year ago. Sales of previously owned homes rose to a more than 9-1/2-year high in October. Demand for housing is being driven by rising wages. Investor speculation on President elect Trump’s proposed public spending program sparking inflation has led to spikes in U.S. government’s bond yields, whose movements are closely aligned with mortgage rates. As the bond price goes down, the yield goes up and long term mortgage interest rates follow suit. Not a direct correlation, but fairly close to it. Call today to catch rates before they rise much further.
The biggest news with regard to the markets since the election has been the spike in long-term interest rates. The stock market has been rising as well, but there seems to have been a greater reaction on the bond market side. First, before anyone pins these trends to the surprise results of the election, one can clearly see that the movement of these markets started before the election took place. The stock market rallied strongly the day before the election and rates started rising several weeks before the election. Thus, while these movements have accelerated since the election, it was certainly not a reversal of trends.
Yes, the election definitely is a factor. With a new President coming in, the markets look at all the promises made during the campaign and start adding up the costs of implementing these promises. For example, take a look at the stimulus package of President Obama, which was in reaction to the Great Recession taking place when he came into office. The difference today is, the markets can see that the same level of stimulus is not needed now, as compared to then. While the economy could be doing better, no one would argue with the fact that the we are in a hundred times better shape than we were eight years ago. Thus, while the markets may fear a huge spree to fulfil promises such as infrastructure spending, this spending does not have to come all at once, and it is not likely that Congress will be writing checks to bust a budget already in deficit.
The bottom line is that rates are increasing because the economy is doing better, and that is good news. The markets were already factoring in an increase in rates by the Federal Reserve Board before the election. That increase is still expected to come in December. As long as the Fed does not surprise the markets with a 0.5% increase, instead of the expected 0.25%, then calm might return to the markets. Remember that long-term rates do not necessarily rise in reaction to the Federal Reserve moving short-term rates upward. As a matter of fact, after the increase last December, rates on home loans decreased due to other factors. Even with the present increase, keep in mind that rates are still very low by historical standards — and that is the best news.
While using a second to avoid the cost of mortgage insurance (MI) may be an option, there are alternatives. Remember that your goal is to understand all viable options and then make a decision as to which one best meets your needs. There are many factors which might determine the best option, and these variables include the details of the transaction, affordability, your borrowing preferences, and more.
For example, perhaps you want to preserve your cash on hand for investment purposes or you’ll need cash for house renovations and/or appliances and furniture. And because of the details of the transaction, you could put 5% down using MI or would have to put 10% down in order not to pay mortgage insurance using a 10% second mortgage or HELOC. Even if you have the additional cash reserves to put the “extra” 5% down, it still may not represent the best use of your money. Possibly you are not undertaking renovations, perhaps you would be more comfortable having larger cash reserves set aside for an emergency. This desire for safety may be especially strong for first-time buyers.
Speaking of renovations, this brings up another variable that you may want to consider. This variable concerns the fact that the MI can be cancelled in the future (usually when a 20% equity position is attained), while a second would typically need to be paid off over a longer period of time.
These are just a couple of thoughts about what is best for you as a borrower if you did not have a full 20% to put down on your new home purchase. There are other options and we believe in presenting them all to you- especially those which are most beneficial for you and your needs.
… for they may not! A sharp spike in mortgage rates in the wake of the presidential election is starting to scuttle sales, according to a CNBC report.
The average interest rate on 30-year fixed rate mortgages spiked to its highest level in more than a year Friday. Buyers who started looking for mortgages when rates were in the 3.5% range suddenly found themselves – in the space of a week – looking at 4.125% rates.
While buyers in a strong financial position can handle a rate spike that extreme, those closer to the lower limits of mortgage eligibility can find themselves out of a deal, CNBC reported. While mortgage rates are still historically low, a spike from the 3% range to the 4% range means many buyers won’t qualify because they suddenly have too great a debt-to-income ratio.
If you are in the market to buy a home or if you have not refinanced while rates were at the lowest in history, NOW is the time to make a move. If you can presently qualify for a mortgage, then please call ABBA First today and allow us to find the best rate and program to meet your needs! Call toll free at 866-676-3349. As the old proverb says- “He who hesitates is lost”. Find out what ABBA First Mortgage can do for you today!
- Rates rose sharply in the past week, reflecting the sharp increase which has taken place since the election.
- For the week ending November 17, Freddie Mac announced that 30-year fixed rates rose to 3.94% from 3.57% the week before.
- The average for 15-year loans increased to 3.14%, and the average for five-year adjustables moved up to 3.07%.
- A year ago, 30-year fixed rates were at 3.97%, virtually the same as today’s levels.
- Attributed to Sean Becketti, Chief Economist, Freddie Mac — “Last week’s election fell in the middle of our survey week, making it impossible to determine how closely the rates on home loans would track the post-election sell-off in the Treasury market.
- This week, the verdict is in — over the last two weeks the rate on 30-year fixed loans jumped 40 basis points to 3.94 percent, almost identical to the 39 basis-point increase in the 10-year Treasury yield.
- If rates stick at these levels, expect a final burst of home sales and refinances as ‘fence sitters’ try to beat further increases, then a marked slowdown in housing activity.”
Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
The move has been dramatic with 10 year Treasuries selling off nearly 50bps in yield. The movement of the 10-year Treasury bond is one of the best indications of whether mortgages rates will rise or fall. When yields go up, mortgage rates tend to follow. According to the latest data released last Thursday by Freddie Mac, the 30-year fixed rate average soared to 3.94 percent. That is 37 basis points higher than the week prior when it was 3.57 percent, the fifth largest one week jump since 2000. This is the highest rates have been since January 2016. It is worth keeping this in perspective, though: we’re still hovering near all-time low rates. The average mortgage rate over the last 45 years is 8.26 percent. Stocks are also reacting very well, up 2+ percent since the election. I’ve heard various rationales for the move including lower taxes, more fiscal stimulus, and less regulation, which all makes sense, but with little in the way of specifics at this point, it is hard to know if this has staying power.