Jeff Cost

Cincinnati Home Loan

What’s Ahead For Mortgage Rates This Week : June 25, 2012

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Fed Funds Rate 2006-2012Mortgage markets worsened last week as Greece tentatively formed a government and the Federal Reserve extended its Operation Twist program by $267 billion.

Neither event, however, removed the uncertainty surrounding global markets.

First, Greece must still adhere to stringent austerity measures in order to meet the terms of its IMF bailout. Its new government, however, may seek to revise the terms of its fiscal austerity, a move that would keep the nation-state — and the European Union — in fragile balance.

As Greece comes closer to resolution, U.S. mortgage rates are likely to rise. This is because economic uncertainty in Greece has helped to keep mortgage rates down since 2010. A reversal in policy would cause mortgage rates to reverse higher.

Second, it’s clear that Wall Street expected more from the Federal Reserve.

The nation’s central banker made moves to pressure long-term rates lower last week, but did little else to prop up an economy it believes will grow only “very gradually” over the next few quarters. Stock markets got a gentle boost from the Fed’s new stimulus, and mortgage rates suffered only slightly.

Overall, conforming mortgage rates in Ohio rose slightly last week, and much of the action occurred after Freddie Mac’s weekly mortgage rate survey concluded Tuesday afternoon.

According to the government-backed mortgage-securitizer, 30-year fixed rate mortgage rates fell 5 basis points to 3.66% nationwide, on average last week. This was the lowest recorded 30-year fixed rate mortgage rate on record as this year’s Refinance Boom continues.

The 15-year fixed rate mortgage rate also dropped, stopping at 2.95%, on average. This is 0.01 higher than the benchmark rate’s all-time low — a record set two weeks ago.

Buyers and would-be refinancers trying to lock a rate this morning may find pricing to be slightly worse.

This week, mortgage markets will continue to take cues from Europe, and from a bevy of U.S. economic data including the New Home Sales report and the release of the Pending Home Sales Index.

Mortgage rates remain near all-time lows. If you’re considering a home purchase or refinance, the timing looks good.

Mortgage Rates Make New Lows At 3.66%

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Freddie Mac mortgage rates for June 21 2012

Mortgage rates have resumed their downward trend.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the national average 30-year fixed rate mortgage rate fell 5 basis points to 3.66% this week. The rate is available to “prime” borrowers who are willing to pay, on average, 0.7 discount points plus a full set of closing costs.

30-year fixed rate mortgage rates are down in seven of the last eight weeks but, depending where you live, the mortgage rates made available to you will vary. The Freddie Mac survey notes that mortgage rates vary by region.

For example, mortgage applicants in the West Region received the lowest rates from lenders, on average, but also paid the highest number of discount points. Discount points are a specific type of closing cost where 1 discount point is a fee equal to one percent of your loan size.

Average mortgage rates in the five U.S. regions, as tracked by Freddie Mac :

  • Northeast Region : 3.70% with 0.7 discount points 
  • West Region : 3.62% with 0.8 discount points
  • Southeast Region : 3.68% with 0.7 discount points
  • North Central Region : 3.65% with 0.7 discount points
  • Southwest Region : 3.68% with 0.7 discount points

Nationally, one year ago, the average 30-year fixed rate mortgage rate was 4.50%. Today, it’s 3.66%. This 84 basis points difference yields a monthly savings of $49 per $100,000 borrowed at today’s rates, or $588 per year.

A $400,000 mortgage would save $2,352 annually at today’s mortgage rates as compared to June 2011.

The 15-year fixed rate mortgage rate is also low, averaging 2.95% nationwide with 0.6 discount points. This is the second-lowest reading in recorded history. However, when the 15-year fixed averaged 2.94%, banks required an average of 0.7 discount points to get it. One could argue that this week’s average rate-and-points combination is actually a better “deal” because closing costs are lower.

Mortgage rates continue to break new lows so, if you’re eligible to refinance, the timing may be right to explore your mortgage options. Similarly, if you’re in the market to buy a home, today’s low rates will help to keep your home affordability high.

Talk to your loan officer about capitalizing on the lowest rates of all-time. Rates in Louisville may not rise starting next week, but when they do rise, they’ll expected to rise quickly.

A Simple Explanation Of The Federal Reserve Statement (June 20, 2012)

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Putting the FOMC statement in plain EnglishThe Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday.

For the fifth consecutive meeting, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member, Richmond Federal Reserve President Jeffrey Lacker, dissented in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008. 

In its press release, the Federal Reserve noted that the U.S. economy has been “expanding moderately” this year. Beyond the next few quarters, the Fed expects growth to “pick up very gradually”. 

In addition, the Fed re-acknowledged that “strains in global financial markets” continue to pose “significant downside risks” to the U.S. economic outlook. This statement is a repeat from the FOMC’s April press release and is in reference to the sovereign debt concerns of Greece, Spain and Italy, plus the potential for a broader European economic slowdown.

The Fed’s statement also included the following economic observations :

  1. The housing sector remains “depressed”
  2. Labor conditions have “slowed in recent months”
  3. Household spending is “rising at a somewhat slower pace” than earlier this year

With respect to inflation, the Fed said that pressures have declined, led by falling oil and gasoline prices. Longer-term inflation expectations remain stable.

The biggest news of the FOMC meeting is that the Federal Reserve will be extending its “Operation Twist” program. The program sells shorter-term securities on the Federal Reserve’s balance sheet and uses the proceeds to purchase longer-term securities. This move puts “downward pressure on longer-term interest rates” and makes “broader financial conditions more accommodative.”

The Fed also pledged to keep the Fed Funds Rate at “exceptionally low” levels at least through late-2014.

Mortgage markets are muted post-FOMC. There has been no real change in rates, although that may change later in the day, or weel. Mortgage rates in Cincinnati remain at all-time lows.

The FOMC’s next scheduled meeting is a two-day event slated for July 31-August 1, 2012.

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