Mortgage News in the Carolinas
Mortgage Rates
The Fed Starts A 2-Day Meeting Today. Make A Strategy.
026 days
by Geoff Brown
in Mortgage Rates
The Federal Open Market Committee begins a 2-day meeting today in the nation’s capitol. It’s the group’s third of 8 scheduled meetings this year. Mortgage rates are expected to change upon the Fed’s adjournment.
Led by Chairman Ben Bernanke, the FOMC is a 12-person, Federal Reserve sub-committee. The FOMC is the group within the Fed which votes on U.S. monetary policy. “Making monetary policy” can mean a lot of things, and the action for which the FOMC is most well-known is its setting of the Fed Funds Funds.
The Fed Funds Rate is the overnight interest rate at which banks borrow money from each other. It’s one of many interest rates set by the Fed.
However, one series of interest rates not set by the Fed is mortgage rates. Instead, mortgage rates are based on the prices of mortgage-backed bonds and bonds are bought and sold on Wall Street.
There is little historical correlation between the Fed Funds Rate and the common, 30-year fixed rate mortgage rate.
As the chart at top shows, since 1990, the Fed Funds Rate and the 30-year fixed rate mortgage rate have followed different paths. Sometimes, they’ve moved in the same direction. Sometimes, they’ve moved in opposite directions.
They’ve been separated by as much as 5.29 percent at times, and have been as near to each other as 0.52 percent.
Today, that spread is roughly 3.65 percent. It’s expected to change beginning 12:30 PM ET Wednesday. That’s when the FOMC will adjourn from its meeting and release its public statement to the markets.
The FOMC is expected to announce no change in the Fed Funds Rate, holding the benchmark rate within in its current target range of 0.000-0.250%. However, how mortgage rates in and around Charlotte respond will depend on the verbiage of the FOMC statement.
In general, if the Fed acknowledges that the U.S. economy as in expansion; growing from job growth and consumer spending, mortgage rates are expected to rise. If the Fed shows concern about domestic and global economic growth, mortgage rates are expected to fall.
Any time that mortgage markets are expected to move, a safe play is to stop shopping your rate and start locking it. Today may be one of those times.
Are You Wasting $471 Per Month On Your Mortgage?
074 days
by Geoff Brown
in Mortgage Rates
According to Freddie Mac’s weekly mortgage rate survey, for 13 straight weeks, the average 30-year fixed rate mortgage has held below 4.000% for mortgage applicants willing to pay up to 0.8 discount points plus a full set of closing costs.
These are the lowest mortgage rates in history and now — with a bevy of loan programs for the nation’s 11 million “underwater homeowners” including HARP, the FHA Streamline Refinance, and the VA IRRRL — millions of U.S. homeowners can exploit the current mortgage rate environment.
In this 4-minute clip from NBC’s The Today Show, you’ll learn about today’s mortgage market and your refinancing opportunities in Carolinas.
The video begins by telling us that 14 million credit-worthy Americans have yet to refinance their respective mortgages, and are leaving an average of $471 in “wasted savings” on the table each month which adds up to more than $5,600 annually.
That’s a big number.
Some of the video’s other key points include :
- Refinancing is “worth the hassle” when mortgage rates are as low as they are today
- The best rates are reserved for homeowners with the highest credit scores
- Comparison shop — your current mortgage lender may not offer you the best rates
Furthermore, the video reveals the characteristics of the homeowner type most likely to benefit from a refinance. These traits include having with 20% equity in the home; have plans to live in the home for at least the next 36 months; carrying a current mortgage rate of 5 percent or higher.
It should also be added that, with a zero-closing-cost or low-closing-cost mortgage, even a small reduction in your mortgage rate can make a refinance worthwhile.
Mortgage rates are low but can’t stay low forever. If you haven’t participated in the Refi Boom, talk with a loan officer and review your mortgage options. You may be able to save hundreds of dollars per month with just modest closing costs.
Adjustable-Rate Mortgages Are A Relative Bargain Today
0135 days
by Geoff Brown
in Mortgage Rates
For buyers and refinancing households throughout Carolinas , adjustable-rate mortgages are a relative bargain as compared to fixed-ones.
According to Freddie Mac’s weekly survey of more than 125 banks nationwide, |**CITY**| mortgage applicants electing for a conventional ARM over a conventional fixed-rate mortgage will save 105 basis points on their next mortgage rate.
“Conventional” loans are loans backed by Fannie Mae or Freddie Mac.
Today’s average, conventional 30-year fixed rate mortgage rate is 3.91% plus points and closing costs. The average rate for a comparable 5-year ARM is 2.86%, plus points and closing costs.
In other words, for every $100,000 borrowed, a conventional 5-year adjustable-rate mortgage will save you $58.15 per month, or $698 per year.
That’s a 12 percent savings just for choosing an ARM.
12 percent is a big figure that adds up over 5 years — especially for households that plan to sell within those first 60 months anyway. There is little sense in paying the mortgage rate premium for a 30-year fixed-rate mortgage when a 5-year ARM is perfectly suitable.
For the reason why adjustable-rate mortgages continue are so much lower than their fixed-rate counterparts, look no further than the U.S. economy. ARMs reflect Wall Street’s short-term economic expectations; whereas fixed-rate mortgages reflect medium- to long-term expectations.
In the short-term, analysts expect the U.S. economy to grow slowly, with low levels of inflation. This supports the U.S. dollar, the currency in which mortgage bonds are denominated. When the dollar is strong, demand for mortgage bonds tends to increase.
This supports lower interest rates.
Conversely, over the longer-term, inflation is expected to return, which devalues the dollar and everything paid in it (e.g.; mortgage-backed bonds). This is why inflation is linked to higher mortgage rates. When inflation is present in the economy, mortgage bonds lose value, driving mortgage rates up.
Adjustable-rate mortgages aren’t perfect for everyone, but in the right situation, they can be a big money-saver and a helpful tool for stretching a household budget. Given today’s rates, the money-saving potential is larger than usual.
Before you choose an ARM, discuss your options with your loan officer.
What’s Ahead For Mortgage Rates This Week : December 12, 2011
0160 days
by Geoff Brown
in Mortgage Rates
Mortgage markets were mostly unchanged for the 6th consecutive week last week as Wall Street’s uncertainty regarding the future of U.S. and global economies remain.
Mortgage bonds made gains made through the early part of the week, which caused mortgage rates in Carolinas to drop Monday through Wednesday afternoon. Those gains were erased, however, as 23 of 27 Euro leaders reached agreement on fiscal coordination and budget planning, sparking optimism for the future of the Eurozone, in general.
Mortgage rates rose Thursday and Friday.
This week, the momentum may continue. The main story we’ll be watching is the Federal Open Market Committee’s Tuesday meeting — its 8th scheduled meeting of the year and its last until 2012.
When the Fed meets, mortgage rates are often volatile.
At its meeting, the FOMC is expected to vote the Fed Funds Rate unchanged within its current range near zero percent. However, it won’t be the Fed’s vote on the Fed Funds Rate that changes markets. Wall Street is keyed in to two other elements, instead.
The first element is the verbiage of the FOMC’s press release to markets. Issued upon adjournment, the FOMC’s press release identifies strengths and weaknesses in the U.S. economy, and offers an outlook for the future plus potential threats. The “tone” of the press release can change how mortgage bonds trade.
If the Fed describes an economy in recovery with few threat to growth, mortgage rates are likely to rise post-FOMC. By contrast, if the Fed says the economy has slowed, mortgage rates should fall.
The second element on which Wall Street is focused is the likelihood of new, Fed-led economic stimulus. Should the Federal Reserve modify existing support programs, or introduce new ones, mortgage rates are sure to shift. Unfortunately, we can’t know in which direction — it will depend on the size of the program and its expected impact on the U.S. economy.
The Fed adjourns Tuesday at 2:15 PM ET.
Beyond the Fed, there is other rate-moving news, too, including Tuesday’s Retail Sales report, Thursday’s Producer Price Index, and Friday’s Consumer Price Index. Each has the capacity to change mortgage rates throughout Charlotte so if you’re floating a mortgage rate, it may be a good time to lock one in.
Freddie Mac reports the average 30-year fixed rate mortgage at 3.99% with 0.7 discount points, plus closing costs.
