Mortgage News in the Carolinas
Posts tagged Mortgage Rates
Retail Sales Rise For 7th Straight Month; Mortgage Rates Worsen
0357 days
by Geoff Brown
in Retail Sales
If consumer spending is a keystone element in the U.S. economic recovery, a full-on rebound is likely underway.
Tuesday, the Census Bureau released its national January Retail Sales figures and, for the seventh straight month, the data surpassed expectations. Last month’s retail figures climbed 0.3 percent as total sales receipts reached an all-time high.
It’s good news for the economy which is scratching back after a prolonged recession, but decidedly bad news for people in want of a mortgage across the state of Carolinas. This includes home buyers and would-be refinancers alike.
Because consumer spending accounts for the majority of the U.S. economy, Retail Sales growth means more economic growth and that draws Wall Street’s dollars toward riskier investments, including equities, at the expense of safer investments such as mortgage-backed bonds.
On the heels of the Retail Sales report’s release, bond prices are falling this morning. As a consequence, mortgage rates are rising. It’s the same pattern we’ve seen since mid-November — “good news” about the economy sparks a stock market frenzy, casuing mortgage bonds to rise.
A sampling of other recent good-for-the-economy stories include:
- Corporate earnings are rising quickly (Marketwatch)
- Existing Home Sales up 12% month-over-month (CNN Money)
- The Fed says the economy looks “brighter” (Bloomberg)
The days of 4 percent, 30-year fixed rate mortgages are over. 5 percent is the new market benchmark. Unless the economy keeps showing strength. Then, that number may rise to six percent.
If you’re thinking of buying or refinancing a home, consider how rising rates will hit your budget. You may want to take that next step sooner than you had planned — if only to protect your monthly payments.
What’s Ahead For Mortgage Rates This Week : February 14, 2011
0358 days
by Geoff Brown
in Weekly Review
Mortgage markets worsened terribly last week. Amid more reports of an improving economy and fears of pending inflation, mortgage rates skyrocketed to their highest levels since April 2010.
According to Freddie Mac, mortgage rates made their largest 1-week jump in more than a year last week, tacking on 0.24 percent and bringing the average national 30-year fixed mortgage rate up to 5.05%.
In some markets, rates are even higher.
Since bottoming out in Freddie Mac’s November 11 survey, conforming, 30-year fixed mortgage rates are now higher by close to a full percentage point. Home buyers in Charlotte and across the nation have lost more than 10% of their purchasing power during that time.
Rates have also been on a historic run higher, increasing over 9 consecutive days for the first time in almost a decade. That streak ended Friday with rates dropping slightly, and rate shoppers are hopeful the momentum lower continues into this week.
It’s not likely. The week is loaded of housing data and housing has been trending better. More strong figures will bolster stock markets at the expense of bonds, driving mortgage rates higher for the 4th week in a row.
In addition, inflation-related figures will be released. That, too, can have a negative impact on mortgage rates.
- Monday : NAHB Homebuilder Confidence Survey
- Tuesday : Retail Sales, Consumer Confidence
- Wednesday : Building Permits, Housing Starts, Producer Price Index, FOMC Minutes
- Thursday : Consumer Price Index
Markets should increase in volatility as the week progresses because of the looming 3-day weekend. Volume will be light Friday in advance of President’s Day.
If you haven’t yet locked your mortgage rate, the time to act is soon — possibly now. Mortgage rates are well off their historical lows, but still relatively inexpensive. Before long, that may no longer be the case.
Adjustable Rate Mortgages Adjusting To 3.000 Percent Right Now
0364 days
If your ARM is due to adjust this spring, your best move may be to allow it. Don’t rush to refinance — your rate may be adjusting lower.
It’s because of how adjusted mortgage rates are calculated.
First, let’s look at the lifecycle of a conventional, adjustable rate mortgage:
- There’s a “starter period” of several years in which the interest rate remains fixed.
- There’s an initial adjustment to rate after the starter period. This is called the “first adjustment”.
- There’s a subsequent adjustment until the loan’s term expires. The adjustment is usually annual.
The starter period will vary from 1 to 10 years, but once that timeframe ends, and the first adjustment occurs, conventional ARMs enter a lifecycle phase that is common among all ARMs — regular rate adjustments based on some pre-set formula until the loan is paid in full, and retired.
For conventional ARMs adjusting in 2011, that formula is most commonly defined as:
(12-Month LIBOR) + (2.250 Percent) = (Adjusted Mortgage Rate)
LIBOR is an acronym for London Interbank Offered Rate. It’s the rate at which banks borrow money from each other. It’s also the variable portion of the adjustable mortgage rate equation. The corresponding constant is typically 2.25%.
Since March 2010, LIBOR has been low and, as a result, adjusting mortgage rates have been low, too.
In 2009, 5-year ARMs adjusted to 6 percent or higher. Today, they’re adjusting near 3.000 percent.
That’s a big shift.
Therefore, strictly based on mathematics, letting your ARM adjust this year could be smarter than refinancing it. You may get yourself a lower rate.
Either way, talk to your loan officer. With mortgage rates still near historical lows, Charlotte homeowners have interesting options. Just don’t wait too long. LIBOR — and mortgage rates in general — are known to change quickly.
What’s Ahead For Mortgage Rates This Week : January 10, 2011
0393 days
by Geoff Brown
in Weekly Review
Mortgage markets gained last week as a combination of safe-haven buying and an improving economic outlook attracted new buyers.
Last week marked the second straight week that mortgage rates fell in and around Carolinas. Rates had risen over the previous 7 weeks.
According to Freddie Mac’s weekly mortgage rate survey, the national average rate for a 30-year fixed rate mortgage is 4.77 percent with an accompanying 0.8 points required.
This week, with no new data due for release, look for last week’s two biggest stories — jobs and debt — to carry forward. The first such story relates to jobs.
Friday, the Bureau of Labor Statistics released its monthly Non-Farm Payrolls report. Consensus estimates were for 150,000 net new jobs created December, with “whisper numbers” pegging the number as high as 250,000. Mortgage rates increased on the chance that the rumors were right.
It turned out, they were not.
Accounting for revisions to past months’ data, December’s jobs data was in-line with expectations, resulting in a mortgage rate retreat that lasted all day Friday. That momentum should carry forward into the early part of this week.
The second story is tied to safe-haven buying.
The U.S. mortgage market benefited from growing concerns within the Eurozone that Portugal could default on its debt. The story emerged three weeks ago when Portugal’s debt was downgraded. It picked up steam last week after a weak debt offering. It’s a similar beginning to what transpired in Greece last spring.
Mindful of their respective risk, worldwide investors chose to shift risk toward safer asset classes which includes, of couse, mortgage-backed bonds. This week, those risks will remain and the flight to quality assets should continue. Mortgage rates will benefit.
Given the likelihood that mortgage rates will fall this week, it may be tempting to let your mortgage rate float. That strategy could prove foolish.
Mortgage rates fell to historic lows in 2010 and sprung higher at the first possible opportunity. Rates remain at ultra-low levels and have lots of room to rise. This week, consider buying on the dip. It may be the last chance you get.
