WASHINGTON – Mortgage rates fell this week to the lowest level on record, giving consumers added incentive to lock in low payments for home purchases and refinanced loans.
The average rate for 30-year fixed loans sank to 4.69 percent, from 4.75 percent last week, mortgage company Freddie Mac said Thursday.
That's the lowest point since Freddie Mac began tracking rates in 1971. The previous record of 4.71 percent was set in December. Rates for 15-year and five-year mortgages also hit lows.
Rates on 15-year fixed-rate mortgages fell to an average of 4.13 percent. That was the lowest on records dating to September 1991. It was down from 4.2 percent a week earlier.
Rates on five-year adjustable-rate mortgages averaged 3.84 percent, down from 3.89 percent a week earlier. That was also the lowest on Freddie Mac's records, which date back to January 2005 for such loans.
Average rates on one-year adjustable-rate mortgages fell to 3.77 percent from 3.82 percent. That was the lowest average since May 2004.
Mortgage rates have fallen over the past two months as nervous investors have shifted money into the safety of Treasury bonds. The demand for Treasurys has caused Treasury yields to fall. And mortgage rates tend to track the yields on long-term Treasurys.
Yet the falling rates have yet to spark a home-buying boom — or energize the economy. New-home sales collapsed in May after homebuying tax credits expired. The economy also remains under pressure from high unemployment. And many people don't qualify under tightened lending rules.
Source: Associated Press, By ALAN ZIBEL, AP Real Estate Writer
Showing posts with label Interest Rates. Show all posts
Showing posts with label Interest Rates. Show all posts
Thursday, June 24, 2010
Monday, April 26, 2010
Get ready for a runaway recovery?
Source: Excerpted from Inman News
SAN FRANCISCO -- The financial crisis is over and the economy is growing at a fast enough clip that the Federal Reserve and other policymakers have already fallen behind the curve in preventing the next asset bubble, economist Ken Rosen said today.
Rosen, the chairman of the University of California, Berkeley's Fisher Center for Real Estate, said, "The financial crisis is over," but the Fed appears to be committed to keeping short-term rates at or near zero for at least six months. "I think short-term rates should be 2 to 3 percent today -- we are encouraging asset bubbles in the stock market, bond markets and global real estate."
SAN FRANCISCO -- The financial crisis is over and the economy is growing at a fast enough clip that the Federal Reserve and other policymakers have already fallen behind the curve in preventing the next asset bubble, economist Ken Rosen said today.
Rosen, the chairman of the University of California, Berkeley's Fisher Center for Real Estate, said, "The financial crisis is over," but the Fed appears to be committed to keeping short-term rates at or near zero for at least six months. "I think short-term rates should be 2 to 3 percent today -- we are encouraging asset bubbles in the stock market, bond markets and global real estate."
Monday, March 22, 2010
Mortgage Rate Update -- Wells Fargo
Weekly Rate Update
All programs quoted are with zero points.
30 Year Fixed
To $417,000 - 5.000%
To $729,750 - 5.125%
Jumbo
Jumbo to $2,000,000 - 5.625%
5 Year Fixed
To $417,000 - 4.000%
To $729,750 - 4.375%
Jumbo to $2,000,000 - 5.250%
Rates
Rates have stabilized over the past few weeks and remain extremely buyer friendly. Fears that the Feds pulling out of the mortgage backed securities markets have been unfounded. Investors have not reacted to losing the largest purchaser on mortgage backed securities the way the markets had predicted. There is some sense of comfort to the markets that there are buyers waiting in the wings to pick up where the Feds leave off. Good news for buyers who are still on the fence. It appears that the markets will remain range bound for the next few weeks until the real impact of the Feds ending the MBS purchase program can actually be felt.
Economic News
Three economic releases this week—industrial production, the Philadelphia Fed index and the leading economic index—all support the view of continued economic growth. Meanwhile the housing starts data suggest that this recovery will be more modest than other recoveries.
Inflation remains low as measured by the Consumer Price Index. The details of this report highlight the slow pace of inflation, which partly reflects the ongoing housing correction. Medical price inflation continues to outpace the overall price index.
All programs quoted are with zero points.
30 Year Fixed
To $417,000 - 5.000%
To $729,750 - 5.125%
Jumbo
Jumbo to $2,000,000 - 5.625%
5 Year Fixed
To $417,000 - 4.000%
To $729,750 - 4.375%
Jumbo to $2,000,000 - 5.250%
Rates
Rates have stabilized over the past few weeks and remain extremely buyer friendly. Fears that the Feds pulling out of the mortgage backed securities markets have been unfounded. Investors have not reacted to losing the largest purchaser on mortgage backed securities the way the markets had predicted. There is some sense of comfort to the markets that there are buyers waiting in the wings to pick up where the Feds leave off. Good news for buyers who are still on the fence. It appears that the markets will remain range bound for the next few weeks until the real impact of the Feds ending the MBS purchase program can actually be felt.
Economic News
Three economic releases this week—industrial production, the Philadelphia Fed index and the leading economic index—all support the view of continued economic growth. Meanwhile the housing starts data suggest that this recovery will be more modest than other recoveries.
Inflation remains low as measured by the Consumer Price Index. The details of this report highlight the slow pace of inflation, which partly reflects the ongoing housing correction. Medical price inflation continues to outpace the overall price index.
Thursday, March 11, 2010
Nab a Deal!
Source: CNN Money
Nab a real estate deal – while you still can
The combination of affordable home prices, low interest rates, and the federal tax credit for home buyers have created an opportune time for many buyers to purchase a home. Many real estate analysts also believe that most housing markets have stabilized, but that some markets may decline further.
MAKING SENSE OF THE STORY FOR CONSUMERS
Buyers should keep in mind that housing markets are local and can vary greatly from one neighborhood to the next. Working with a REALTOR® familiar with the area in which the buyer is searching can help the buyer select a house that best suits their needs.
California’s housing market has shown signs of stabilization since early last year. Sales of existing, single-family homes bottomed out in August 2007, and the median home price reached its trough in February 2009. In January, California’s median home price was 17.2 percent above the low for the current cycle.
The federal tax credit for home buyers was extended and expanded late last year. Qualified first-time buyers may be eligible to receive a tax credit of up to $8,000 on homes purchased before April 30, 2010. Repeat buyers may be eligible for a tax credit of up to $6,500. Visit http://www.irs.gov/newsroom/article/0,,id=187935,00.html for more information about the federal tax credit for home buyers, including eligibility requirements.
The Federal Reserve has helped maintain low interest rates, which, in turn, has assisted home buyers. However, the agency plans to stop purchasing mortgage-backed securities at the end of this month, which likely will increase rates on 30-year fixed mortgages. Buyers may be able to lock in a low interest rate by working with their lender.
Nab a real estate deal – while you still can
The combination of affordable home prices, low interest rates, and the federal tax credit for home buyers have created an opportune time for many buyers to purchase a home. Many real estate analysts also believe that most housing markets have stabilized, but that some markets may decline further.
MAKING SENSE OF THE STORY FOR CONSUMERS
Buyers should keep in mind that housing markets are local and can vary greatly from one neighborhood to the next. Working with a REALTOR® familiar with the area in which the buyer is searching can help the buyer select a house that best suits their needs.
California’s housing market has shown signs of stabilization since early last year. Sales of existing, single-family homes bottomed out in August 2007, and the median home price reached its trough in February 2009. In January, California’s median home price was 17.2 percent above the low for the current cycle.
The federal tax credit for home buyers was extended and expanded late last year. Qualified first-time buyers may be eligible to receive a tax credit of up to $8,000 on homes purchased before April 30, 2010. Repeat buyers may be eligible for a tax credit of up to $6,500. Visit http://www.irs.gov/newsroom/article/0,,id=187935,00.html for more information about the federal tax credit for home buyers, including eligibility requirements.
The Federal Reserve has helped maintain low interest rates, which, in turn, has assisted home buyers. However, the agency plans to stop purchasing mortgage-backed securities at the end of this month, which likely will increase rates on 30-year fixed mortgages. Buyers may be able to lock in a low interest rate by working with their lender.
Monday, March 8, 2010
Mortgage News -- Updated 3/8/2010
Source: Peter Pham, Private Mortgage Advisors
Rates
People are talking. The Fed's have been know to be very accommodative to the markets sentiment. As we learned with Chairman Greenspan, surprising the market, good or bad can lead to wild speculation and mood swings in the markets behavior. The "market" assumed last fall that rates would be rising in 12 to 18 months. This is still within line of the expectations. This article from the Washington Post summarizes where economist predict rates will go in the next six months.
Most U.S. business economists expect the Federal Reserve to raise benchmark interest rates within six months by between a quarter and a half percentage point, according to a survey released on Monday.
A majority of economists in the National Association of Business Economists' semiannual survey found the Fed's current stance of rates near zero percent is appropriate. A growing number, however, believe the U.S. central bank's policy's are too simulative, according to a poll of 203 members taken February 4-22.
"A majority believes that a rise in interest rates is both likely and appropriate in the next several months," said NABE President Lynn Reaser.
The Fed has said continued high rates of unemployment and low inflation warrant holding rates exceptionally low for an extended period. Still, reports show the economy is recovering gradually, and some policy makers believe the Fed should begin to prepare markets for the beginning of the process of tightening financial conditions.
Economic News
Employment and consumer spending are important indicators as the market looks for signs of recovery.
Employment losses have steadily declined over the past six months. In fact, private sector jobs (ex-construction) have risen over the past two months. There is a cyclical recovery in private sector jobs while the structural problems in real estate limit the recovery. Job gains have also appeared in manufacturing sectors such as machinery, primary metals and electrical equipment. Meanwhile the index of hours worked has risen over the last three months, consistent with sustained economic growth. Combining hours worked and average hourly earnings, our income proxy has broken into positive growth territory. This suggests positive income and therefore spending gains in the months ahead.
Retail sales continue to post respectable gains, considering the continued drag on household spending power due to high unemployment and slowing wage growth. Consumer balance sheets, while healing, remain severely impaired from continued high debt levels and reduced wealth, while access to affordable bank credit remains difficult for many. Still there appears to be real pent-up demand for necessities like clothes since many consumers delayed purchases of these items during the worst of the recession last spring. Moreover, stabilizing employment and steady stock market gains have helped more fence sitters to go ahead with their purchase plans, especially among the higher income bracket households. We expect February retail sales to advance another 0.2 percent following a 0.5 percent increase in January. Retail sales less autos could advance even more, rising 0.6 percent in February.
First Time Homebuyers Tax Credit
The first-time homebuyer tax credit of up to $8,000 and the move-up homebuyer tax credit of up to $6,500 expire at the end of April. The home has to be under contract by the end of April, and the deal has to close by the end of June. The maximum home price is $800,000 according to the link below. As a reminder for clients who want to take advantage of the tax credit before it expires, I have provided the link with answers for your clients.
http://www.federalhousingtaxcredit.com/home.html
Rates
People are talking. The Fed's have been know to be very accommodative to the markets sentiment. As we learned with Chairman Greenspan, surprising the market, good or bad can lead to wild speculation and mood swings in the markets behavior. The "market" assumed last fall that rates would be rising in 12 to 18 months. This is still within line of the expectations. This article from the Washington Post summarizes where economist predict rates will go in the next six months.
Most U.S. business economists expect the Federal Reserve to raise benchmark interest rates within six months by between a quarter and a half percentage point, according to a survey released on Monday.
A majority of economists in the National Association of Business Economists' semiannual survey found the Fed's current stance of rates near zero percent is appropriate. A growing number, however, believe the U.S. central bank's policy's are too simulative, according to a poll of 203 members taken February 4-22.
"A majority believes that a rise in interest rates is both likely and appropriate in the next several months," said NABE President Lynn Reaser.
The Fed has said continued high rates of unemployment and low inflation warrant holding rates exceptionally low for an extended period. Still, reports show the economy is recovering gradually, and some policy makers believe the Fed should begin to prepare markets for the beginning of the process of tightening financial conditions.
Economic News
Employment and consumer spending are important indicators as the market looks for signs of recovery.
Employment losses have steadily declined over the past six months. In fact, private sector jobs (ex-construction) have risen over the past two months. There is a cyclical recovery in private sector jobs while the structural problems in real estate limit the recovery. Job gains have also appeared in manufacturing sectors such as machinery, primary metals and electrical equipment. Meanwhile the index of hours worked has risen over the last three months, consistent with sustained economic growth. Combining hours worked and average hourly earnings, our income proxy has broken into positive growth territory. This suggests positive income and therefore spending gains in the months ahead.
Retail sales continue to post respectable gains, considering the continued drag on household spending power due to high unemployment and slowing wage growth. Consumer balance sheets, while healing, remain severely impaired from continued high debt levels and reduced wealth, while access to affordable bank credit remains difficult for many. Still there appears to be real pent-up demand for necessities like clothes since many consumers delayed purchases of these items during the worst of the recession last spring. Moreover, stabilizing employment and steady stock market gains have helped more fence sitters to go ahead with their purchase plans, especially among the higher income bracket households. We expect February retail sales to advance another 0.2 percent following a 0.5 percent increase in January. Retail sales less autos could advance even more, rising 0.6 percent in February.
First Time Homebuyers Tax Credit
The first-time homebuyer tax credit of up to $8,000 and the move-up homebuyer tax credit of up to $6,500 expire at the end of April. The home has to be under contract by the end of April, and the deal has to close by the end of June. The maximum home price is $800,000 according to the link below. As a reminder for clients who want to take advantage of the tax credit before it expires, I have provided the link with answers for your clients.
http://www.federalhousingtaxcredit.com/home.html
Tuesday, February 9, 2010
Mortgage Update
Source: Ken Mason, Mortgage California
Tuesday’s bond market has opened in negative territory following strong gains in stocks. The stock markets are on the rebound with the Dow up 126 points and the Nasdaq up 23 points. The bond market is currently down 9/32, which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point.
There was no relevant economic data scheduled for release today, so look for the stock markets to be the biggest influence on bond trading and mortgage rates the remainder of the day. If the major stock indexes remain near current levels, expect the bond market and mortgage rates to follow suit. If they give back this morning’s gains, the bond market may improve, possibly improving mortgage rates this afternoon.
The first economic report of the week comes tomorrow morning, but it is the least important of the three scheduled. December’s Goods and Services Trade Balance data will be posted early tomorrow morning. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to affect mortgage rates. It is expected to show a $35.5 billion trade deficit.
The two important Treasury auctions come tomorrow and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important one as it will give us an indication for demand of mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would likely result in upward revisions to mortgage rates.
Tuesday’s bond market has opened in negative territory following strong gains in stocks. The stock markets are on the rebound with the Dow up 126 points and the Nasdaq up 23 points. The bond market is currently down 9/32, which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point.
There was no relevant economic data scheduled for release today, so look for the stock markets to be the biggest influence on bond trading and mortgage rates the remainder of the day. If the major stock indexes remain near current levels, expect the bond market and mortgage rates to follow suit. If they give back this morning’s gains, the bond market may improve, possibly improving mortgage rates this afternoon.
The first economic report of the week comes tomorrow morning, but it is the least important of the three scheduled. December’s Goods and Services Trade Balance data will be posted early tomorrow morning. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to affect mortgage rates. It is expected to show a $35.5 billion trade deficit.
The two important Treasury auctions come tomorrow and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important one as it will give us an indication for demand of mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would likely result in upward revisions to mortgage rates.
Monday, February 1, 2010
Rates at a Glance
Source: Mortgage California
30 Year Conf Fixed
4.875% 1 point
5/1 Conforming
3.500% 1 point
30 Yr Agency Jumbo
5.00% 1 point
30 Year FHA
4.750% 1 point
5 Year Jumbo
5.00% 1 point
10 Year Jumbo
5.375% 1 point
Rates are subject to change and are for illustrative purposes ONLY
30 Year Conf Fixed
4.875% 1 point
5/1 Conforming
3.500% 1 point
30 Yr Agency Jumbo
5.00% 1 point
30 Year FHA
4.750% 1 point
5 Year Jumbo
5.00% 1 point
10 Year Jumbo
5.375% 1 point
Rates are subject to change and are for illustrative purposes ONLY
Monday, January 25, 2010
Daily Mortgage Commentary
Monday’s bond market has opened down slightly despite a much weaker than expected housing report. The stock markets are posting minor gains with the Dow up 25 points and the Nasdaq up 5 points. The bond market is currently down 2/32, but we will still likely see an increase in this morning’s mortgage rates of approximately .125 - .250 of a discount point due to weakness late Friday.
The National Association of Realtors reported late this morning that home resales fell a whopping 16.7% last month. Analysts were expecting to see a sizable decline in sales, but this was much larger than thought. The surprising drop indicates that the housing sector still is not stable, which is good news for the bond market and mortgage rates. Some of the loss is being attributed to the initial expiration of the home buyer tax credit, but I don’t believe many analysts are blaming the entire loss on that factor. This raises further concerns about the housing sector and makes a broader economic recovery less likely to be in the near future.
The rest of the week is extremely busy in terms of economic data scheduled for release and will likely be an active week for mortgage rates. There are six more relevant economic releases scheduled for the week in addition to a Federal Open Market Committee (FOMC) meeting.
January’s Consumer Confidence Index (CCI) will be released late tomorrow morning. This report is considered to be of high-importance to the bond market and therefore can move mortgage rates. It is an indicator of consumer sentiment, which is important because a decline would be construed as a sign that consumers may be less willing to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, market participants are very attentive to related data. A reading smaller than the expected 53.5 would be ideal for the bond market and mortgage rates.
And if we didn’t have enough to watch already, there are two relatively important Treasury auctions for the markets to digest. The Fed will auction 5-year and 7-year Treasury Notes Wednesday and Thursday, respectively. If they are met with a strong demand from investors, the broader bond market may rally during afternoon hours those days. However, a lackluster interest in the sales could lead to bond selling and higher mortgage rates.
Source: Ken Mason, Mortgage California
The National Association of Realtors reported late this morning that home resales fell a whopping 16.7% last month. Analysts were expecting to see a sizable decline in sales, but this was much larger than thought. The surprising drop indicates that the housing sector still is not stable, which is good news for the bond market and mortgage rates. Some of the loss is being attributed to the initial expiration of the home buyer tax credit, but I don’t believe many analysts are blaming the entire loss on that factor. This raises further concerns about the housing sector and makes a broader economic recovery less likely to be in the near future.
The rest of the week is extremely busy in terms of economic data scheduled for release and will likely be an active week for mortgage rates. There are six more relevant economic releases scheduled for the week in addition to a Federal Open Market Committee (FOMC) meeting.
January’s Consumer Confidence Index (CCI) will be released late tomorrow morning. This report is considered to be of high-importance to the bond market and therefore can move mortgage rates. It is an indicator of consumer sentiment, which is important because a decline would be construed as a sign that consumers may be less willing to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, market participants are very attentive to related data. A reading smaller than the expected 53.5 would be ideal for the bond market and mortgage rates.
And if we didn’t have enough to watch already, there are two relatively important Treasury auctions for the markets to digest. The Fed will auction 5-year and 7-year Treasury Notes Wednesday and Thursday, respectively. If they are met with a strong demand from investors, the broader bond market may rally during afternoon hours those days. However, a lackluster interest in the sales could lead to bond selling and higher mortgage rates.
Source: Ken Mason, Mortgage California
Thursday, January 14, 2010
Mortgage and Interest Rate Update
THURSDAY AFTERNOON UPDATE:
The bond market has improved from early gains following a fairly strong 30-year Bond auction. The stock markets have not moved too much from this morning’s levels with the Dow currently up 30 points and the Nasdaq up 8 points. The bond market has improved from this morning, currently up 19/32. This will likely improve this afternoon’s mortgage rates slightly, even after this morning’s improvement. But, many lenders may opt to wait until tomorrow’s pricing to reflect this improvement.
The Commerce Department reported this morning that retail level sales fell 0.3% last month, falling well short of expectations. Analysts were expecting to see a 0.5% increase in sales, meaning consumers spent less last month than many had thought. This is good news for bonds and mortgage rates because drops in consumer spending eases inflation and economic recovery concerns. That creates a favorable environment for the bond market and mortgage rates. However, minimizing this news was a sizable upward revision to November’s sales, indicating that consumers spent more in November than was previously thought.
There are three economic reports scheduled for release tomorrow morning. The first is December’s Consumer Price Index (CPI). This is also one of the most important monthly reports that we see since it measures inflationary pressures at the consumer level of the economy. The overall index is expected to rise 0.2% while the core data is expected to increase 0.1%. Weaker than expected readings should lead to bond improvements and lower mortgage rates tomorrow morning.
December’s Industrial Production report is the second report. It will be released at 9:15 AM ET and measures output at U.S. factories, mines and utilities. This gives us a good indication of manufacturing sector strength or weakness. Current forecasts are calling for an increase in production of 0.6% from November’s level. A smaller than expected increase would be considered good news for bonds and should lead to lower mortgage rates as long as the CPI doesn’t reveal any negative surprises.
The final report of the week is January’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates. Good news would be if it shows a reading weaker than the 73.8 that is expected. However, it is not one of the week’s more important releases and probably will have little impact on tomorrow’s mortgage rates due to the importance of the CPI and production reports.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now...
Source: Ken Mason, Mortgage California
The bond market has improved from early gains following a fairly strong 30-year Bond auction. The stock markets have not moved too much from this morning’s levels with the Dow currently up 30 points and the Nasdaq up 8 points. The bond market has improved from this morning, currently up 19/32. This will likely improve this afternoon’s mortgage rates slightly, even after this morning’s improvement. But, many lenders may opt to wait until tomorrow’s pricing to reflect this improvement.
The Commerce Department reported this morning that retail level sales fell 0.3% last month, falling well short of expectations. Analysts were expecting to see a 0.5% increase in sales, meaning consumers spent less last month than many had thought. This is good news for bonds and mortgage rates because drops in consumer spending eases inflation and economic recovery concerns. That creates a favorable environment for the bond market and mortgage rates. However, minimizing this news was a sizable upward revision to November’s sales, indicating that consumers spent more in November than was previously thought.
There are three economic reports scheduled for release tomorrow morning. The first is December’s Consumer Price Index (CPI). This is also one of the most important monthly reports that we see since it measures inflationary pressures at the consumer level of the economy. The overall index is expected to rise 0.2% while the core data is expected to increase 0.1%. Weaker than expected readings should lead to bond improvements and lower mortgage rates tomorrow morning.
December’s Industrial Production report is the second report. It will be released at 9:15 AM ET and measures output at U.S. factories, mines and utilities. This gives us a good indication of manufacturing sector strength or weakness. Current forecasts are calling for an increase in production of 0.6% from November’s level. A smaller than expected increase would be considered good news for bonds and should lead to lower mortgage rates as long as the CPI doesn’t reveal any negative surprises.
The final report of the week is January’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates. Good news would be if it shows a reading weaker than the 73.8 that is expected. However, it is not one of the week’s more important releases and probably will have little impact on tomorrow’s mortgage rates due to the importance of the CPI and production reports.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now...
Source: Ken Mason, Mortgage California
Wednesday, January 13, 2010
Mortgage and Interest Rate Update
Wednesday’s bond market has opened in negative territory as investors prepare for today’s auction. The stock markets are in positive ground with the Dow up 28 points and the Nasdaq up 6 points. The bond market is currently down 8/32, but we likely will see little change in this morning’s mortgage rates due to strength late yesterday.
Today’s only relevant economic news will come from the Federal Reserve this afternoon when they post their Beige Book report. This report, which is named simply after the color of its cover, details economic conditions throughout the U.S. by region. Since the Fed relies heavily on it during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any surprises. It will be released at 2:00 PM ET, so any reaction to its results will come later today.
Also on tap today is the 10-year Treasury Note auction. If there is a strong demand for them during the sale, we should see the bond market move higher during afternoon trading. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would result in upward revisions to mortgage rates. We will repeat this scenario tomorrow for the 30-year Bond auction.
Tomorrow morning brings us the release of December’s Retail Sales data. This is one of the more important reports we see each month it measures consumer spending by tracking sales at retail establishments in the U.S. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. Current forecasts are calling for an increase in sales of approximately 0.5%. A smaller than expected increase would be good news for bonds and mortgage rates tomorrow.
The Labor Department will post last week’s unemployment figures tomorrow morning also. They are expected to show that 436,000 new claims for benefits were filed last week, but I doubt this data will cause much movement in mortgage rates. It tracks only a week’s worth of new claims, so its impact on the markets is usually minimal.
Source: Ken Mason, Mortgage California
Today’s only relevant economic news will come from the Federal Reserve this afternoon when they post their Beige Book report. This report, which is named simply after the color of its cover, details economic conditions throughout the U.S. by region. Since the Fed relies heavily on it during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any surprises. It will be released at 2:00 PM ET, so any reaction to its results will come later today.
Also on tap today is the 10-year Treasury Note auction. If there is a strong demand for them during the sale, we should see the bond market move higher during afternoon trading. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would result in upward revisions to mortgage rates. We will repeat this scenario tomorrow for the 30-year Bond auction.
Tomorrow morning brings us the release of December’s Retail Sales data. This is one of the more important reports we see each month it measures consumer spending by tracking sales at retail establishments in the U.S. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. Current forecasts are calling for an increase in sales of approximately 0.5%. A smaller than expected increase would be good news for bonds and mortgage rates tomorrow.
The Labor Department will post last week’s unemployment figures tomorrow morning also. They are expected to show that 436,000 new claims for benefits were filed last week, but I doubt this data will cause much movement in mortgage rates. It tracks only a week’s worth of new claims, so its impact on the markets is usually minimal.
Source: Ken Mason, Mortgage California
Tuesday, December 1, 2009
The Fed’s all in and throwing in the kitchen sink for good measure
"The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability"
Stock and bond markets are celebrating in the wake of an FOMC statement that exceeded nearly all expectations for a substantial easing of policy today. At the time of this writing, the Dow is up about 340 points, and the 10-Yr Treasury yield has plunged to 2.36 percent from 2.50 percent yesterday. Throwing all caution to the wind, the Fed is betting that drastic rate cuts are needed immediately in order to support consumer and business borrowing in the face of a rapidly deteriorating economy and the specter of deflationary forces afoot. Such drastic measures only highlight the scale and scope of the current economic and financial crisis that still lies ahead. The Fed is now pulling nearly all its policy levers and only time will tell if it is pushing on a string, or if monetary policy still has a viable channel in which to operate.
For the first time in its history the Fed has decided to establish a target range for the Fed funds rate of between zero and 0.25 percent, effectively making 0.25 percent its interest rate ceiling. This is also an admission that the Fed has been having trouble maintaining its target as massive injections of about $1.0 trillion into various credit facilities, bank re-capitalization, and the payment of interest on bank reserves make an explicit target nearly impossible to achieve. The movement to a target range also rightly puts the focus of additional policy actions on the scope and scale of outright purchases of MBS, and agency debt. The committee is also exploring the potential benefits of purchasing longer-term Treasury securities as well.
Moreover, the FOMC signaled that they expect to maintain an exceptionally low fed funds rate target of some time. This signal is designed to push longer-term Treasury yields even lower, and from today’s action it seems to have worked.
The FOMC statement begins by describing an economy mired in a deepening recession, with little prospect for near-term relief, stating that labor market conditions have deteriorated, and consumer spending, business investment, and industrial production have declined. The Fed’s view of credit market conditions has not improved, and their outlook for the economy has weakened further.
Finally, the Fed doesn’t mention the prospect of deflation in the statement, but did highlight the prospect for inflation to moderate further in the coming quarters.
Expect further expansion and utilization of the Fed’s existing credit facilities, as well as the addition of new ones in 2009 as the Fed moves further down the path of quantitative easing.
Source: Scott A. Anderson, Ph.D.
Senior Economist, Wells Fargo Economics
Stock and bond markets are celebrating in the wake of an FOMC statement that exceeded nearly all expectations for a substantial easing of policy today. At the time of this writing, the Dow is up about 340 points, and the 10-Yr Treasury yield has plunged to 2.36 percent from 2.50 percent yesterday. Throwing all caution to the wind, the Fed is betting that drastic rate cuts are needed immediately in order to support consumer and business borrowing in the face of a rapidly deteriorating economy and the specter of deflationary forces afoot. Such drastic measures only highlight the scale and scope of the current economic and financial crisis that still lies ahead. The Fed is now pulling nearly all its policy levers and only time will tell if it is pushing on a string, or if monetary policy still has a viable channel in which to operate.
For the first time in its history the Fed has decided to establish a target range for the Fed funds rate of between zero and 0.25 percent, effectively making 0.25 percent its interest rate ceiling. This is also an admission that the Fed has been having trouble maintaining its target as massive injections of about $1.0 trillion into various credit facilities, bank re-capitalization, and the payment of interest on bank reserves make an explicit target nearly impossible to achieve. The movement to a target range also rightly puts the focus of additional policy actions on the scope and scale of outright purchases of MBS, and agency debt. The committee is also exploring the potential benefits of purchasing longer-term Treasury securities as well.
Moreover, the FOMC signaled that they expect to maintain an exceptionally low fed funds rate target of some time. This signal is designed to push longer-term Treasury yields even lower, and from today’s action it seems to have worked.
The FOMC statement begins by describing an economy mired in a deepening recession, with little prospect for near-term relief, stating that labor market conditions have deteriorated, and consumer spending, business investment, and industrial production have declined. The Fed’s view of credit market conditions has not improved, and their outlook for the economy has weakened further.
Finally, the Fed doesn’t mention the prospect of deflation in the statement, but did highlight the prospect for inflation to moderate further in the coming quarters.
Expect further expansion and utilization of the Fed’s existing credit facilities, as well as the addition of new ones in 2009 as the Fed moves further down the path of quantitative easing.
Source: Scott A. Anderson, Ph.D.
Senior Economist, Wells Fargo Economics
Tuesday, November 24, 2009
Daily Commentary
Tuesday’s bond market has opened fairly flat after this morning’s economic data gave us mixed results. The stock markets are giving back some of yesterday’s gains with the Dow down 36 points and the Nasdaq down 12 points. The bond market is currently up 2/32, but we will likely see an improvement in this morning’s mortgage rates of approximately .250 of a discount point due to strength in bonds late yesterday.
This morning’s release of the 3rd Quarter Gross Domestic Product (GDP) revision revealed a downward revision, as expected. It revealed a 2.8% annual rate of growth during the third quarter that nearly matched forecasts. This means that the economy did not grow as much during the 3rd quarter than previously thought. That is good news for bonds and mortgage rates, but since the 2.8% increase was nearly what analysts had predicted, the impact on this morning’s trading and mortgage pricing has been minimal.
November’s Consumer Confidence Index (CCI) was posted late this morning, showing a reading of 49.5. This was higher than forecasts were calling for, indicating that consumers were more optimistic about their own financial situations than many had thought. That is considered negative news for bonds because rising confidence means consumers are more apt to make large purchases in the near future, effectively fueling economic growth.
We have two more events to watch for later today. The first are the results of the 5-year Note auction being held today. They will be posted at 1:00 PM ET. If there was a strong demand from investors, we could see bond prices rise and mortgage rates fall this afternoon. But a lackluster interest in the sale could lead to higher mortgage pricing.
The FOMC minutes may be a major mover of the markets or a non-factor, depending on what they say. The key will be concerns over inflation and the Fed’s next move. If the Fed members were concerned about inflationary pressures and overly optimistic about economic growth, we may see the bond market move lower and mortgage rates higher after they are released at 2:00 PM ET.
There are four reports scheduled for release tomorrow morning. October’s Durable Goods Orders is the first and will be posted early morning. This data helps us measure manufacturing strength by tracking orders for big-ticket items, but is known to be quite volatile from month-to-month. It is expected to show a 0.5% increase in new orders. A smaller than expected rise would be considered good news for the bond market and mortgage rates.
The second is October’s Personal Income and Outlays data. This data is thought to measure consumers’ ability to spend and their current spending habits. This is important because consumer spending makes up two-thirds of the U.S. economy. It is expected to show that income rose 0.2% and that spending increases 0.5%. Smaller than expected readings would be good news for bonds and could lead to improvements in mortgage rates.
The revised November reading to the University of Michigan Index of Consumer Sentiment will be posted late tomorrow morning. Analysts are expecting to see an upward revision of 1.0 to the preliminary reading of 66.0. Unless we see a significant variance from the forecasted reading of 67.0, I don’t think this data will cause much movement in mortgage rates tomorrow.
October’s New Home Sales is the last report, but it is the least important. I don’t think this data will influence mortgage rates unless it varies greatly from forecasts and the rest of the day’s news matches forecasts. It is expected to show a slight increase in sales of newly constructed homes.
Source: Ken Mason, Mortgage California
This morning’s release of the 3rd Quarter Gross Domestic Product (GDP) revision revealed a downward revision, as expected. It revealed a 2.8% annual rate of growth during the third quarter that nearly matched forecasts. This means that the economy did not grow as much during the 3rd quarter than previously thought. That is good news for bonds and mortgage rates, but since the 2.8% increase was nearly what analysts had predicted, the impact on this morning’s trading and mortgage pricing has been minimal.
November’s Consumer Confidence Index (CCI) was posted late this morning, showing a reading of 49.5. This was higher than forecasts were calling for, indicating that consumers were more optimistic about their own financial situations than many had thought. That is considered negative news for bonds because rising confidence means consumers are more apt to make large purchases in the near future, effectively fueling economic growth.
We have two more events to watch for later today. The first are the results of the 5-year Note auction being held today. They will be posted at 1:00 PM ET. If there was a strong demand from investors, we could see bond prices rise and mortgage rates fall this afternoon. But a lackluster interest in the sale could lead to higher mortgage pricing.
The FOMC minutes may be a major mover of the markets or a non-factor, depending on what they say. The key will be concerns over inflation and the Fed’s next move. If the Fed members were concerned about inflationary pressures and overly optimistic about economic growth, we may see the bond market move lower and mortgage rates higher after they are released at 2:00 PM ET.
There are four reports scheduled for release tomorrow morning. October’s Durable Goods Orders is the first and will be posted early morning. This data helps us measure manufacturing strength by tracking orders for big-ticket items, but is known to be quite volatile from month-to-month. It is expected to show a 0.5% increase in new orders. A smaller than expected rise would be considered good news for the bond market and mortgage rates.
The second is October’s Personal Income and Outlays data. This data is thought to measure consumers’ ability to spend and their current spending habits. This is important because consumer spending makes up two-thirds of the U.S. economy. It is expected to show that income rose 0.2% and that spending increases 0.5%. Smaller than expected readings would be good news for bonds and could lead to improvements in mortgage rates.
The revised November reading to the University of Michigan Index of Consumer Sentiment will be posted late tomorrow morning. Analysts are expecting to see an upward revision of 1.0 to the preliminary reading of 66.0. Unless we see a significant variance from the forecasted reading of 67.0, I don’t think this data will cause much movement in mortgage rates tomorrow.
October’s New Home Sales is the last report, but it is the least important. I don’t think this data will influence mortgage rates unless it varies greatly from forecasts and the rest of the day’s news matches forecasts. It is expected to show a slight increase in sales of newly constructed homes.
Source: Ken Mason, Mortgage California
Tuesday, October 6, 2009
Mortgage Rate Outlook
Oct. 2, 2009 -- With September now
behind us, stock markets started
October in a fashion similar to other
Octobers: they sold off to some
degree. After a pretty good third
quarter's profits were booked, at
least some of those gains from
equity sales have been stashed
back into Treasuries, driving yields
down. This is turn is pressuring
mortgage rates down to the lows of
earlier this year.
The overall average for 30-year
FRMs declined by almost a tenthpercent
this week, and HSH's FRMI
closed Friday with five-day average
of 5.40%. Five-one hybrid ARMs
also eased back, shedding eight
basis points to close the national
survey at 4.74%. At 5.07%, conforming
30-year FRMs sported their
lowest average rate since the late
March to late May period gave us
nine consecutive weeks just over
(and under) the 5% mark.
A bright spot was Construction
Spending rose by 0.8%, its second
positive reading of the year. More
impressive was the 4.7% rise in
spending for residential projects,
which was more than enough to
offset drags from the troubled commercial
sector (-0.1%) and the 1.1%
drop in the public sector. Stimulus
money isn't making it out to lowerlevel
projects all that quickly, and
cash-strapped states and counties
are simply putting projects on indefinite
hold.
Low mortgage rates continue to
provide support for housing markets,
and the gains in residential
construction spending could be one
of the keys to getting a firmer recovery
underway. However, credit
conditions remain tight, and while
home prices have begun to firm to
some degree, it may be a long time
until most underwater homeowners
will be able to take advantage of
those low rates to recast their balance
sheets.
Does October continue to live up to
its reputation as a wicked month for
stocks? To the degree that it does,
mortgage rates should benefit.
Spring lows ignited a fair bit of refi
activity, but building lasting refi
waves requires low (if not continually
declining) interest rates for a
period of weeks, even months. We'll
continue to have low rates, but
significant declines are unlikely. If
you're considering refinancing, don't
hesitate too long or a fickle October
market may catch you napping.
Treasury yields dipped at week's
end, so mortgage rates should start
next week on a softer note.
behind us, stock markets started
October in a fashion similar to other
Octobers: they sold off to some
degree. After a pretty good third
quarter's profits were booked, at
least some of those gains from
equity sales have been stashed
back into Treasuries, driving yields
down. This is turn is pressuring
mortgage rates down to the lows of
earlier this year.
The overall average for 30-year
FRMs declined by almost a tenthpercent
this week, and HSH's FRMI
closed Friday with five-day average
of 5.40%. Five-one hybrid ARMs
also eased back, shedding eight
basis points to close the national
survey at 4.74%. At 5.07%, conforming
30-year FRMs sported their
lowest average rate since the late
March to late May period gave us
nine consecutive weeks just over
(and under) the 5% mark.
A bright spot was Construction
Spending rose by 0.8%, its second
positive reading of the year. More
impressive was the 4.7% rise in
spending for residential projects,
which was more than enough to
offset drags from the troubled commercial
sector (-0.1%) and the 1.1%
drop in the public sector. Stimulus
money isn't making it out to lowerlevel
projects all that quickly, and
cash-strapped states and counties
are simply putting projects on indefinite
hold.
Low mortgage rates continue to
provide support for housing markets,
and the gains in residential
construction spending could be one
of the keys to getting a firmer recovery
underway. However, credit
conditions remain tight, and while
home prices have begun to firm to
some degree, it may be a long time
until most underwater homeowners
will be able to take advantage of
those low rates to recast their balance
sheets.
Does October continue to live up to
its reputation as a wicked month for
stocks? To the degree that it does,
mortgage rates should benefit.
Spring lows ignited a fair bit of refi
activity, but building lasting refi
waves requires low (if not continually
declining) interest rates for a
period of weeks, even months. We'll
continue to have low rates, but
significant declines are unlikely. If
you're considering refinancing, don't
hesitate too long or a fickle October
market may catch you napping.
Treasury yields dipped at week's
end, so mortgage rates should start
next week on a softer note.
Thursday, January 29, 2009
Rates on 30-Year Mortgages Edged Down This Week, but Remain Above 5%
McLEAN, Va. (AP) -- Rates on 30-year mortgages edged down this week, but remained above 5 percent, Freddie Mac reported Thursday.
The average rate on a 30-year fixed mortgage dipped to 5.10 percent this week from 5.12 percent last week. At this time last year, the 30-year, fixed-rate mortgage averaged 5.68 percent.
Mortgage rates have been declining since the Federal Reserve said in late November it would buy up to $500 billion in mortgage-backed securities to get banks to lend more money in hopes of bolstering the troubled housing market.
Rates hit 4.96 percent two weeks ago, the lowest level since Freddie Mac started its survey in April 1971.
This week, the average rate on a 15-year fixed-rate mortgage was unchanged at 4.8 percent. The comparable rate a year ago was 5.17 percent.
Average rates on five-year, adjustable-rate mortgages rose to 5.27 percent from 5.24 percent. Rates on one-year, adjustable-rate mortgages fell to 4.9 percent from 4.92 percent last week.
The rates do not include add-on fees known as points. The nationwide fee for 30-year and 15-year mortgages averaged 0.7 point for this week. Fees for one-year and five-year adjustable rate mortgages averaged sixth-tenths of a point.
Freddie Mac and sibling company Fannie Mae own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt. The government seized control of the companies in September.
The average rate on a 30-year fixed mortgage dipped to 5.10 percent this week from 5.12 percent last week. At this time last year, the 30-year, fixed-rate mortgage averaged 5.68 percent.
Mortgage rates have been declining since the Federal Reserve said in late November it would buy up to $500 billion in mortgage-backed securities to get banks to lend more money in hopes of bolstering the troubled housing market.
Rates hit 4.96 percent two weeks ago, the lowest level since Freddie Mac started its survey in April 1971.
This week, the average rate on a 15-year fixed-rate mortgage was unchanged at 4.8 percent. The comparable rate a year ago was 5.17 percent.
Average rates on five-year, adjustable-rate mortgages rose to 5.27 percent from 5.24 percent. Rates on one-year, adjustable-rate mortgages fell to 4.9 percent from 4.92 percent last week.
The rates do not include add-on fees known as points. The nationwide fee for 30-year and 15-year mortgages averaged 0.7 point for this week. Fees for one-year and five-year adjustable rate mortgages averaged sixth-tenths of a point.
Freddie Mac and sibling company Fannie Mae own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt. The government seized control of the companies in September.
Wednesday, January 21, 2009
Mortgage Rates Hit New Low -11th in a Row
(01-18) 04:00 PST McLean, Va.
Rates on 30-year mortgages set a record for a fifth straight week by dropping to below 5 percent, the lowest mark since Freddie Mac started tracking the data in 1971.
Freddie Mac reported Thursday that average rates on 30-year fixed mortgages dropped to 4.96 percent last week, down from 5.01 percent the previous week.
The average rate on a 15-year fixed-rate mortgage rose to 4.65 percent from 4.62 percent last week, while rates on five-year adjustable-rate mortgages fell to 5.25 percent. Rates on one-year adjustable-rate mortgages fell to 4.89 percent from 4.95 percent.
Rates on 30-year mortgages set a record for a fifth straight week by dropping to below 5 percent, the lowest mark since Freddie Mac started tracking the data in 1971.
Freddie Mac reported Thursday that average rates on 30-year fixed mortgages dropped to 4.96 percent last week, down from 5.01 percent the previous week.
The average rate on a 15-year fixed-rate mortgage rose to 4.65 percent from 4.62 percent last week, while rates on five-year adjustable-rate mortgages fell to 5.25 percent. Rates on one-year adjustable-rate mortgages fell to 4.89 percent from 4.95 percent.
Tuesday, December 23, 2008
Coming Down...But Will They Go Lower?
TODAY'S RATES from Bankrate.com
Overnight Averages Today +/-
1 yr jumbo ARM 6.60%
3/1 jumbo ARM 6.07%
3/1 jumbo ARM (interest only) 5.95%
7/1 jumbo ARM 6.08%
7/1 jumbo ARM (interest only) 6.24%
2/28 ARM 6.45%
3/27 ARM 6.47%
40 yr fixed mtg 6.36%
30 yr fixed mtg 5.28%
15 yr fixed mtg 5.23%
1 yr ARM 5.67%
30 yr fixed jumbo mtg 6.97%
30 yr FHA mtg 5.74%
5/1 ARM 5.83%
5/1 jumbo ARM 5.95%
3/1 ARM 5.75%
7/1 ARM 5.99%
10/1 ARM 6.23%
15 yr fixed jumbo mtg 6.42%
10 yr fixed mtg 5.12%
20 yr fixed mtg 5.13%
3/1 ARM (interest only) 5.60%
5/1 ARM (interest only) 5.83%
5/1 jumbo ARM (interest only) 6.13%
7/1 ARM (interest only) 6.01%
Overnight Averages Today +/-
1 yr jumbo ARM 6.60%
3/1 jumbo ARM 6.07%
3/1 jumbo ARM (interest only) 5.95%
7/1 jumbo ARM 6.08%
7/1 jumbo ARM (interest only) 6.24%
2/28 ARM 6.45%
3/27 ARM 6.47%
40 yr fixed mtg 6.36%
30 yr fixed mtg 5.28%
15 yr fixed mtg 5.23%
1 yr ARM 5.67%
30 yr fixed jumbo mtg 6.97%
30 yr FHA mtg 5.74%
5/1 ARM 5.83%
5/1 jumbo ARM 5.95%
3/1 ARM 5.75%
7/1 ARM 5.99%
10/1 ARM 6.23%
15 yr fixed jumbo mtg 6.42%
10 yr fixed mtg 5.12%
20 yr fixed mtg 5.13%
3/1 ARM (interest only) 5.60%
5/1 ARM (interest only) 5.83%
5/1 jumbo ARM (interest only) 6.13%
7/1 ARM (interest only) 6.01%
Monday, December 22, 2008
Mortgage Activity Surges at US Banks
By Saskia Scholtes in New York
Published: December 22 2008 19:37 | Last updated: December 22 2008 19:37
US banks are having trouble handling a surge of mortgage applications spurred by dramatically lower interest rates, after record loan defaults and thousands of job cuts have stretched mortgage industry resources to the limit.
Applications for home loans more than doubled in the two weeks after the Federal Reserve said it would buy mortgage bonds to help stabilise the market, prompting mortgage rates to fall by more than three-quarters of a percentage point.
EDITOR’S CHOICE
In depth: Global financial crisis - Nov-11In depth: US banks - Nov-22In depth: US downturn - Dec-05With average rates for a 30-year, fixed-rate mortgage now at about 5.2 per cent, growing numbers of borrowers have an incentive to refinance to bring down their mortgage costs.
However, tighter underwriting standards for prospective borrowers, combined with funding and staffing difficulties for mortgage originators, are likely to restrict the supply of new mortgages.
“The mortgage industry is collectively unprepared to deal with a cascade of business; staffs were pared to the bone as the market for mortgages shrank over the past year,” analysts at HSH Associates wrote in a note to clients.
Mahesh Swaminathan, mortgage analyst at Credit Suisse, said that as a result, lower rates would not necessarily create a wave of mortgage refinancing on the scale that was seen in 2003, when credit markets were healthy.
“There is a lot of pipeline congestion. Originators don’t have the staffing or the credit lines to fund a lot of loans,” said Mr Swaminathan. “You have more due diligence which requires more staffing. It is not something that can be changed overnight.”
Part of the problem is that banks have directed the bulk of their manpower toward their servicing arms in an attempt to stem the tide of mortgage defaults and foreclosures.
While banks have pledged to use capital they have received from the US Treasury to boost consumer lending, they are also under intense political pressure to modify loan terms for struggling borrowers as a matter of urgency.
Loan modifications have continued to grow more quickly than other strategies such as subsidy programmes or refinancing into government loans, according to the Office of the Comptroller of the Currency.
The number of new loan modifications grew 16 per cent in the third quarter to more than 133,000, said the OCC. The rate of loan modification is likely to be even higher in fourth-quarter data, say analysts, as a result of recent initiatives by Fannie Mae and Freddie Mac, the two large mortgage financiers, as well as private sector loan modification schemes.
However, modified loans can still require substantial servicing resources, as more than 55 per cent of modified loans fall back into default in the first six months, according to the OCC.
Additional reporting by Nicole Bullock in New York
Copyright The Financial Times Limited 2008
Published: December 22 2008 19:37 | Last updated: December 22 2008 19:37
US banks are having trouble handling a surge of mortgage applications spurred by dramatically lower interest rates, after record loan defaults and thousands of job cuts have stretched mortgage industry resources to the limit.
Applications for home loans more than doubled in the two weeks after the Federal Reserve said it would buy mortgage bonds to help stabilise the market, prompting mortgage rates to fall by more than three-quarters of a percentage point.
EDITOR’S CHOICE
In depth: Global financial crisis - Nov-11In depth: US banks - Nov-22In depth: US downturn - Dec-05With average rates for a 30-year, fixed-rate mortgage now at about 5.2 per cent, growing numbers of borrowers have an incentive to refinance to bring down their mortgage costs.
However, tighter underwriting standards for prospective borrowers, combined with funding and staffing difficulties for mortgage originators, are likely to restrict the supply of new mortgages.
“The mortgage industry is collectively unprepared to deal with a cascade of business; staffs were pared to the bone as the market for mortgages shrank over the past year,” analysts at HSH Associates wrote in a note to clients.
Mahesh Swaminathan, mortgage analyst at Credit Suisse, said that as a result, lower rates would not necessarily create a wave of mortgage refinancing on the scale that was seen in 2003, when credit markets were healthy.
“There is a lot of pipeline congestion. Originators don’t have the staffing or the credit lines to fund a lot of loans,” said Mr Swaminathan. “You have more due diligence which requires more staffing. It is not something that can be changed overnight.”
Part of the problem is that banks have directed the bulk of their manpower toward their servicing arms in an attempt to stem the tide of mortgage defaults and foreclosures.
While banks have pledged to use capital they have received from the US Treasury to boost consumer lending, they are also under intense political pressure to modify loan terms for struggling borrowers as a matter of urgency.
Loan modifications have continued to grow more quickly than other strategies such as subsidy programmes or refinancing into government loans, according to the Office of the Comptroller of the Currency.
The number of new loan modifications grew 16 per cent in the third quarter to more than 133,000, said the OCC. The rate of loan modification is likely to be even higher in fourth-quarter data, say analysts, as a result of recent initiatives by Fannie Mae and Freddie Mac, the two large mortgage financiers, as well as private sector loan modification schemes.
However, modified loans can still require substantial servicing resources, as more than 55 per cent of modified loans fall back into default in the first six months, according to the OCC.
Additional reporting by Nicole Bullock in New York
Copyright The Financial Times Limited 2008
Tuesday, December 16, 2008
Instant Analysis of Today’s FOMC Decision
The Fed’s all in and throwing in the kitchen sink for good measure.
"The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability"
Stock and bond markets are celebrating in the wake of an FOMC statement that exceeded nearly all expectations for a substantial easing of policy today. At the time of this writing, the Dow is up about 340 points, and the 10-Yr Treasury yield has plunged to 2.36 percent from 2.50 percent yesterday. Throwing all caution to the wind, the Fed is betting that drastic rate cuts are needed immediately in order to support consumer and business borrowing in the face of a rapidly deteriorating economy and the specter of deflationary forces afoot. Such drastic measures only highlight the scale and scope of the current economic and financial crisis that still lies ahead. The Fed is now pulling nearly all its policy levers and only time will tell if it is pushing on a string, or if monetary policy still has a viable channel in which to operate.
For the first time in its history the Fed has decided to establish a target range for the Fed funds rate of between zero and 0.25 percent, effectively making 0.25 percent its interest rate ceiling. This is also an admission that the Fed has been having trouble maintaining its target as massive injections of about $1.0 trillion into various credit facilities, bank re-capitalization, and the payment of interest on bank reserves make an explicit target nearly impossible to achieve. The movement to a target range also rightly puts the focus of additional policy actions on the scope and scale of outright purchases of MBS, and agency debt. The committee is also exploring the potential benefits of purchasing longer-term Treasury securities as well.
Moreover, the FOMC signaled that they expect to maintain an exceptionally low fed funds rate target of some time. This signal is designed to push longer-term Treasury yields even lower, and from today’s action it seems to have worked.
The FOMC statement begins by describing an economy mired in a deepening recession, with little prospect for near-term relief, stating that labor market conditions have deteriorated, and consumer spending, business investment, and industrial production have declined. The Fed’s view of credit market conditions has not improved, and their outlook for the economy has weakened further.
Finally, the Fed doesn’t mention the prospect of deflation in the statement, but did highlight the prospect for inflation to moderate further in the coming quarters.
Expect further expansion and utilization of the Fed’s existing credit facilities, as well as the addition of new ones in 2009 as the Fed moves further down the path of quantitative easing.
Scott A. Anderson, Ph.D.
Senior Economist
Wells Fargo Economics
"The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability"
Stock and bond markets are celebrating in the wake of an FOMC statement that exceeded nearly all expectations for a substantial easing of policy today. At the time of this writing, the Dow is up about 340 points, and the 10-Yr Treasury yield has plunged to 2.36 percent from 2.50 percent yesterday. Throwing all caution to the wind, the Fed is betting that drastic rate cuts are needed immediately in order to support consumer and business borrowing in the face of a rapidly deteriorating economy and the specter of deflationary forces afoot. Such drastic measures only highlight the scale and scope of the current economic and financial crisis that still lies ahead. The Fed is now pulling nearly all its policy levers and only time will tell if it is pushing on a string, or if monetary policy still has a viable channel in which to operate.
For the first time in its history the Fed has decided to establish a target range for the Fed funds rate of between zero and 0.25 percent, effectively making 0.25 percent its interest rate ceiling. This is also an admission that the Fed has been having trouble maintaining its target as massive injections of about $1.0 trillion into various credit facilities, bank re-capitalization, and the payment of interest on bank reserves make an explicit target nearly impossible to achieve. The movement to a target range also rightly puts the focus of additional policy actions on the scope and scale of outright purchases of MBS, and agency debt. The committee is also exploring the potential benefits of purchasing longer-term Treasury securities as well.
Moreover, the FOMC signaled that they expect to maintain an exceptionally low fed funds rate target of some time. This signal is designed to push longer-term Treasury yields even lower, and from today’s action it seems to have worked.
The FOMC statement begins by describing an economy mired in a deepening recession, with little prospect for near-term relief, stating that labor market conditions have deteriorated, and consumer spending, business investment, and industrial production have declined. The Fed’s view of credit market conditions has not improved, and their outlook for the economy has weakened further.
Finally, the Fed doesn’t mention the prospect of deflation in the statement, but did highlight the prospect for inflation to moderate further in the coming quarters.
Expect further expansion and utilization of the Fed’s existing credit facilities, as well as the addition of new ones in 2009 as the Fed moves further down the path of quantitative easing.
Scott A. Anderson, Ph.D.
Senior Economist
Wells Fargo Economics
Federal Reserve Has Cut Rates
WASHINGTON (AP) -- The Federal Reserve has cut its target for a key interest rate to the lowest level on record and pledged to use "all available tools" to combat a severe financial crisis and prolonged recession.
The central bank on Tuesday said it had reduced the federal funds rate, the interest that banks charge each other, to a range of zero to 0.25 percent. That is down from the 1 percent target rate in effect since the last meeting in October. Many analysts had expected the Fed to make a smaller cut to 0.5 percent.
The Fed's aggressive move was greeted enthusiastically by Wall Street. The Dow Jones industrial average rose about 210 points in late-afternoon trading.
The Fed's action and statement made clear that economic conditions have worsened since its last meeting in October.
Federal Reserve Chairman Ben Bernanke and his colleagues said they will use unconventional methods to try to contain a financial crisis that is the worst since the 1930s and a recession that is already the longest in a quarter-century. For example, the Fed last month said it planned to purchase up to $600 billion in direct debt and mortgage-backed securities issued by big financial players including Fannie Mae and Freddie Mac in an effort to boost the availability of mortgage loans.
That move was one of a series the central bank has taken to increase its loans by hundreds of billions of dollars as a way to deal with the worst financial crisis to hit the country in more than 70 years. The Fed on Tuesday also made clear that it intends to keep the funds rate at extremely low levels. "The committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time," the central bank's panel that sets interest rates said in a statement.
Even before the announcement of a lower target, the funds rate has been trading well below the old target of 1 percent. For November, the funds rate had averaged 0.39 percent. Analysts said it was likely to fall further with the Fed setting the new target as low as zero. The Fed's decision is expected to be quickly matched by a reduction in banks' prime lending rate, the benchmark rate for millions of business and consumer loans. Before the Fed announcement, the prime rate stood at 4 percent.
The Fed has never pushed its target for the federal funds rate as low as zero to 0.25 percent. The lowest target rate before had been 1 percent, a level seen only once before in the past half-century. Given how low interest rates are, the central bank said it planned to use a variety of unconventional methods to flood the banking system with credit and drive interest rates lower. "The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," the Fed said.
The announcement on the deployment of unconventional methods had been expected given that Bernanke and other Fed officials have sought in recent comments to let financial markets know that the central bank will not be out of ammunition to battle the economic downturn even with the funds rate at such low levels.
In its statement Tuesday, the Fed said that since its last meeting in late October, "labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment and industrial production have declined. Financial markets remain quite strained and credit conditions tight."
The central bank acknowledged that it had room to battle the economic weakness because inflation pressures have "diminished appreciably" as the price of energy and other commodities has fallen sharply. The Fed action came only hours after the government announced that consumer prices dropped by a record amount of 1.7 percent in November, reflecting a record decline in the price of gasoline and other energy products.
The central bank on Tuesday said it had reduced the federal funds rate, the interest that banks charge each other, to a range of zero to 0.25 percent. That is down from the 1 percent target rate in effect since the last meeting in October. Many analysts had expected the Fed to make a smaller cut to 0.5 percent.
The Fed's aggressive move was greeted enthusiastically by Wall Street. The Dow Jones industrial average rose about 210 points in late-afternoon trading.
The Fed's action and statement made clear that economic conditions have worsened since its last meeting in October.
Federal Reserve Chairman Ben Bernanke and his colleagues said they will use unconventional methods to try to contain a financial crisis that is the worst since the 1930s and a recession that is already the longest in a quarter-century. For example, the Fed last month said it planned to purchase up to $600 billion in direct debt and mortgage-backed securities issued by big financial players including Fannie Mae and Freddie Mac in an effort to boost the availability of mortgage loans.
That move was one of a series the central bank has taken to increase its loans by hundreds of billions of dollars as a way to deal with the worst financial crisis to hit the country in more than 70 years. The Fed on Tuesday also made clear that it intends to keep the funds rate at extremely low levels. "The committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time," the central bank's panel that sets interest rates said in a statement.
Even before the announcement of a lower target, the funds rate has been trading well below the old target of 1 percent. For November, the funds rate had averaged 0.39 percent. Analysts said it was likely to fall further with the Fed setting the new target as low as zero. The Fed's decision is expected to be quickly matched by a reduction in banks' prime lending rate, the benchmark rate for millions of business and consumer loans. Before the Fed announcement, the prime rate stood at 4 percent.
The Fed has never pushed its target for the federal funds rate as low as zero to 0.25 percent. The lowest target rate before had been 1 percent, a level seen only once before in the past half-century. Given how low interest rates are, the central bank said it planned to use a variety of unconventional methods to flood the banking system with credit and drive interest rates lower. "The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," the Fed said.
The announcement on the deployment of unconventional methods had been expected given that Bernanke and other Fed officials have sought in recent comments to let financial markets know that the central bank will not be out of ammunition to battle the economic downturn even with the funds rate at such low levels.
In its statement Tuesday, the Fed said that since its last meeting in late October, "labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment and industrial production have declined. Financial markets remain quite strained and credit conditions tight."
The central bank acknowledged that it had room to battle the economic weakness because inflation pressures have "diminished appreciably" as the price of energy and other commodities has fallen sharply. The Fed action came only hours after the government announced that consumer prices dropped by a record amount of 1.7 percent in November, reflecting a record decline in the price of gasoline and other energy products.
Friday, December 12, 2008
What's Next for Interest rates
What's Next for Interest Rates?
Lower rates seem likely in December as all recent indicators point to more troubled economic times. The Federal Reserve has already slashed its target rate down to 1 percent, without having done much to bolster lender confidence. Many analysts are estimating that the unemployment rate will continue to rise and this holiday season will likely produce lackluster spending results. The forecast for December interest rates is looking rather frosty!
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Lower rates seem likely in December as all recent indicators point to more troubled economic times. The Federal Reserve has already slashed its target rate down to 1 percent, without having done much to bolster lender confidence. Many analysts are estimating that the unemployment rate will continue to rise and this holiday season will likely produce lackluster spending results. The forecast for December interest rates is looking rather frosty!
Brrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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