15-year mortgage

Apache is functioning normally

A few years back, the Fed began purchasing mortgage-backed securities in an effort to lower interest rates on mortgages.

Over time, the endeavor, known as Quantitative Easing (QE) proved successful and borrowers enjoyed the lowest mortgage rates in history.

As planned, mortgage rates dipped to record lows, prompting a housing recovery that at the time appeared as if it would never come.

The 30-year fixed mortgage hit its lowest point during the week ending November 21, 2012, averaging 3.31%, according to statistics from mortgage financier Freddie Mac.

About five months later, the 15-year mortgage fixed bottomed out at 2.56% during the first week of May.

Mortgage Rates About 1% Above All-Time Lows

  • Even though mortgage rates are no longer at their lowest lows
  • They’re still very cheap historically
  • But the Fed created unrealistic expectations
  • Especially for those who have only seen today’s rates and weren’t old enough to remember when much higher rates were the norm

Since then, rates on both popular loan programs have increased significantly, rising to 4.46% and 3.47%, respectively, after the Fed hinted at ending or tapering its QE program.

Rates on each are now about a percentage point above their all-time lows, but still historically cheap.

For example, the 30-year fixed averaged 17.48% back in early 1982, which is about four times current levels.

Still, it doesn’t seem good enough these days, now that borrowers have gotten a taste of something better.

It’s a weird human psychology, but once we experience something better, it’s hard to “go back” to the prior situation.

Home Buyers Think Mortgage Rates Below 5% Are “Normal”

  • If you look back at history
  • A sub-5% 30-year fixed mortgage rate is certainly not normal
  • Nor something you should always expect
  • So don’t look a gift horse in the mouth

Case in point, a new survey from property search website Redfin, which revealed that homeowners now consider mortgage rates below 5% as the norm.

The company conducted the survey in November, asking home buyers what they considered the “normal” rate for a 30-year fixed mortgage.

The overwhelming response among all those polled was 4-5%, with 53% selecting that rate range. Even worse, 27% felt a rate between 3-4% was normal.

It then slips considerably, with 12% indicating a ate between 5-6% is the norm, and small handfuls selecting rates as low as 2-3%, and others going with a rate higher than 7%.

A staggering 83% of respondents felt a normal fixed-mortgage rate was somewhere below 5%. Hmm…

If we further break it down by first-time home buyer and seasoned home buyer, the numbers aren’t much different.

In fact, seasoned home buyers seem even more delusional than first-timers. For example, 57% of seasoned buyers feel rates between 4-5% are the norm, compared to just 48% of first-timers.

However, 31% of first timers indicated a rate between 3-4% was normal, compared to just 23% of the seasoned homeowners.

Mortgage Rates Have Averaged 6.7% Since 1990

  • If we look at the actual numbers going back ~30 years
  • You’ll find that the 30-year fixed averaged a much higher 6.7%
  • So to get a rate in the 3, 4, or even 5% range should be regarded as a deal
  • But clearly affordability will erode as both rates and home prices rise in tandem

Here’s the reality of the situation. The 30-year fixed has averaged 6.7% since 1990, more than two percentage points above current levels.

And fixed mortgage rates only dipped below the 5% threshold once before March 2009. So to say consumers have gotten used to something that isn’t at all normal would be an enormous understatement.

Oh, and 40% of prospective buyers said they would be unable or unwilling to purchase a home if rates rise much more. Troubling to say the least.

Makes you wonder if this recovery is for real, or simply rate driven.

Read more: What mortgage rate should I expect?

Source: thetruthaboutmortgage.com

Apache is functioning normally

Average mortgage rates for 30-year and 15-year mortgages fell to all-time lows this week, Freddie Mac said in a report on Thursday.

The 30-year average is 2.86%, breaking the prior low of 2.88% set in the first week of August, and the 15-year average is 2.37%, beating last week’s record low of 2.42%, the mortgage financier said.

The rates are driving demand in the housing market, helping to counter-balance an economic slowdown that showed signs of worsening after the COVID-19 pandemic flared in some of the nation’s largest states in recent months, said Sam Khater, Freddie Mac’s chief economist.

“These low rates have ignited robust purchase demand activity,” Khater said.

U.S. home sales surged at a record pace in June and July as purchases that were delayed during pandemic lockdowns were shifted later in the year.

Seasonally adjusted existing-home sales jumped 25% in July, beating the prior record monthly gain of 21% set in June, the National Association of Realtors said in an Aug. 21 report.

The supply of homes on the market was the lowest for any July since NAR started tracking the data about five decades ago, said Lawrence Yun, NAR’s chief economist.

Existing home sales in 2020 likely will total 5.4 million, a gain of 1.1% from last year, Yun said. Sales of new houses probably will rise 17% to 800,000, Yun said.

Early in the pandemic, before it was clear the Federal Reserve’s intervention in the bond market would drive mortgage rates to all-time lows, Yun projected home sales in 2020 would plummet 15% this year.

“The buyers are coming in because of the low interest rates – that’s the No. 1 reason in my view,” Yun said in an interview.

Source: housingwire.com

Apache is functioning normally

Home loan applications slowed for a fifth straight week, with interest rates and a sluggish housing market pushing purchase activity to its lowest mark since the mid-1990s, the Mortgage Bankers Association said.

The MBA’s Market Composite Index, a measure of weekly application activity based on surveys of the trade group’s members, continued its recent downward descent, falling another 4.2% for the period ending Aug. 18. The two previous weekly surveys reported more muted drops of 0.8% and 3.1%. Compared to the same week in 2022, volumes were 31.6% lower. 

Surging interest rates, again, provided consumers with limited buying opportunities and a lack of incentive to sell or refinance, with the 30-year fixed average also landing at a decades-long high among MBA lenders, according to Joel Kan, vice president and deputy chief economist of the organization.
“Treasury yields continued to spike last week as markets grappled with illiquidity and concerns that the resilient economy will keep inflation stubbornly high. This spike pushed mortgage rates higher last week,” Kan said in a press release.

The contract average for the 30-year conforming fixed-rate mortgage with balances below $726,200 in most areas leaped another 15 basis points week-over-week to finish at 7.31% — the highest since late 2000. A week earlier, the average sat at 7.16%. Borrowers also used 0.78 points on average, up from 0.68 seven days earlier, for 80% loan-to-value ratio loans.

The contract 30-year fixed rate for jumbo mortgages with balances above conforming amounts also accelerated to an average of 7.27% compared to 7.11% in the prior survey. Meanwhile, points increased to 0.84 from 0.55.

The spike in rates drove home-purchase application numbers to their lowest point since April 1995, “as homebuyers withdrew from the market due to the elevated rate environment and the erosion of purchasing power,” Kan said. The seasonally adjusted Purchase Index fell 5% from seven days earlier. Activity came in 30% below levels from a year ago. 

“Low housing supply is also keeping home prices high in many markets, adding to the affordability hurdles buyers are facing,” Kan added. 

Recent research from Zillow found rates would need to drop to 5% before many current homeowners would be willing to put their homes up for sale. While the homebuilding industry is seeing some benefits from fewer sales of existing homes, the rate of building is not creating enough supply quickly enough to substantially lower prices.  

The MBA’s Refinance Index also dropped 2.8% from the prior week, with activity coming in 34.9% lower from the same week of 2022. But refinances took a 29.5% share relative to the total number, up from 28.6% seven days earlier due to the larger fall in purchases.

The slowdown in purchase mortgages also hit government-sponsored loan volumes after a recent uptick in some applications guaranteed by federal agencies. But although the seasonally adjusted Government Index slipped downward last week, the share of federally guaranteed mortgage applications picked up. 

Loans backed by the Federal Housing Administration garnered a 14.3% share compared to 13.8% in the prior survey. Department of Veterans Affairs-sponsored applications accounted for 11.6%, edging down from 11.8% a week earlier. Mortgage applications coming through the U.S. Department of Agriculture took a 0.5% share, up from 0.4%.

With recent interest rate movements taking a larger bite out of what home buyers might be able to afford in August, purchase loan sizes fell last week. The average purchase-application amount saw a 2.2% drop to $407,700, its lowest mark since early January. One week earlier, the mean size came in at $417,200.

Average refinance amounts grew, though, by 1% to $254,500 from $251,900. The overall average for all applications stood at $362,600, 2% lower from $369,600 seven days earlier. 

Consumer interest in adjustable-rate mortgages grew last week, though. “Some homebuyers are looking to lower their monthly payments by accepting some interest-rate risk after the initial fixed period,” Kan said.

“The ARM share of applications increased to 7.6%, the highest level in five months, and the number of ARM applications picked up by 4% last week,” he said. 

With rates today more than twice as high compared to the mortgage boom of two years ago, ARM activity has grabbed a noticeably larger share of application volume over the past 24 months. In late August 2021, ARMs accounted for just 3.1% of all applications, with the percentage doubling by the same point in 2022 and remaining above 6% for most of the ensuing year.

The hefty increases in mortgage rates among MBA lenders were not limited to the conforming and jumbo markets either. Two weeks after hitting a high last seen in 2002, the average contract rate of the 30-year FHA-backed mortgage accelerated to 7.09%, passing that peak after it had retreated to 6.93% in the last survey. Points also increased to 1.2 from 1.17.

The fixed contract average for the 15-year mortgage surged 15 basis points to 6.72% from 6.57% a week earlier. As they did for all other fixed loans, points increased, rising to 1.06 from 0.94 for 80% LTV loans.

The 5/1 adjustable-rate mortgage also saw its average increase by 30 basis points to finish at 6.5%, compared to 6.2% seven days prior. Rates on these loans stay fixed for a half decade before adjusting to market levels. In contrast to fixed-rate mortgages, though, borrower points on the 5/1 ARM dropped to 1.03 from 1.45.

Source: nationalmortgagenews.com

Apache is functioning normally

The average U.S. mortgage rate for a 30-year fixed loan is 2.88% this week, falling from last week’s 2.9%, Freddie Mac said in a report on Thursday. The rate is now two basis points from an all-time low set three weeks ago.

The average fixed rate for a 15-year mortgage was 2.36%, falling from last week’s 2.4% to a level that’s one basis point away from the record 2.35% set two weeks ago, the mortgage giant said.

It was the tenth consecutive week average mortgage rates have been below 3%, boosting demand for homes and driving up prices, said Sam Khater, Freddie Mac’s chief economist.

“As a result of low mortgage rates that have stayed under three percent since July, the housing market has seen a strong, upward trajectory during a very uncertain time,” said Khater. “We’re seeing potential homebuyers who now have more purchasing power.”

Pending home sales, measuring signed contracts to purchase properties, soared 8.8% in August to a record high, the National Association of Realtors said in a report on Wednesday.

“Tremendously low mortgage rates – below 3% – have again helped pending home sales climb in August,” said Lawrence Yun, NAR’s chief economist. “Additionally, the Fed intends to hold short-term fed funds rates near 0% for the foreseeable future, which should in the absence of inflationary pressure keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace.”

The housing market typically plays a counter-cyclical role during recessions because economic slowdowns tend to push mortgage rates lower, Yun said. However, this time surpassed his expectations, he said.

“While I did very much expect the housing sector to be stable during the pandemic-induced economic shutdowns, I am pleasantly surprised to see the industry bounce back so strongly and so quickly,” Yun said.

In March, the Federal Reserve started buying bonds – Treasuries and mortgage-backed securities – to prevent a credit crunch and make borrowing cheaper. Since then, the central bank has bought about $1 trillion of bonds backed by home loans, according to Fed data.

Source: housingwire.com

Apache is functioning normally

The average U.S. mortgage rate for a 30-year fixed loan fell to 2.81% this week, the lowest in Freddie Mac’s survey history, the mortgage giant said in a report on Thursday. The rate fell six basis points from the week prior and is now five basis points lower than the original all-time low set in mid-September.

The average fixed rate for a 15-year mortgage was 2.35%, falling from last week’s 2.37% — matching the record set three weeks ago.

There have now been 12 consecutive weeks when average mortgage rates have been below 3% and this is the tenth record broken this year, said Sam Khater, Freddie Mac’s chief economist.

“Low mortgage rates have become a regular occurrence in the current environment,” Khater said. “Many people are benefitting as refinance activity remains strong. However, it’s important to remember that not all people are able to take advantage of low rates given the effects of the pandemic.”

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Although mortgage applications fell seven basis points last week, purchase applications have now boasted 21 weeks of year-over-year gains.

In September, the Federal Reserve predicted that rates will remain low through 2023.

Source: housingwire.com

Apache is functioning normally

The average U.S. mortgage rate for a 30-year fixed loan is 2.87% this week, dropping one basis point from last week’s 2.88%, Freddie Mac said in a report on Thursday. The rate is now one basis point from an all-time low set in mid-September.

The average fixed rate for a 15-year mortgage was 2.37%, rising one basis point from last week’s 2.36%, the mortgage securitizer said.

Mortgage rates that have stayed below 3% for 11 consecutive weeks have boosted housing demand, acting as a counter-weight for an economy that is struggling amid the worst public health crisis in more than a century.

“With near-record-low rates, buyer demand remains robust with strong first-time buyers coming into the market,” said Sam Khater, Freddie Mac’s chief economist. “The demand is particularly strong in more affordable regions of the country such as the Midwest, where home prices are accelerating at the highest rates over the last two decades.”

Sales of existing homes rose to a 14-year high of six million at an annualized pace in August, the National Association of Realtors said in a report last month.

Combined sales of single-family houses, townhomes, condominiums and cooperatively owned apartments rose 2.4% from July, according to the report. Compared to a year ago, prior to the COVID-19 pandemic, August’s sales were 11% higher, NAR said.

“The buyers are coming in because of the low interest rates – that’s the number 1 reason,” said Lawrence Yun, NAR’s chief economist.

The low rates are also putting upward pressure on home prices, because cheaper financing typically means borrowers qualify for bigger mortgages and can bid higher for properties they want. The median existing-home price in August was $310,600, up 11.4%, and prices rose in every region, NAR said.

The boost in demand that comes from the low rates have worsened an inventory shortage that plagued the market long before the pandemic hit the U.S.

The number of homes on the market at the end of August totaled 1.49 million, down 18.6% year-over-year, the NAR report said.

Unsold inventory measured as a “months supply” number that gauges how long it would take to sell all the homes if nothing else came on the market, was three months, NAR said. That’s down from 3.1 months in July and compared with four months a year ago.

Source: housingwire.com

Apache is functioning normally

The average U.S. mortgage rate for a 30-year fixed loan is 2.9% this week, up from 2.87% last week, Freddie Mac said in a report on Thursday. It’s the ninth consecutive week the rate has been below 3%.

The average rate for the less-popular 15-year mortgage was 2.4%, rising from last week’s record low of 2.35%, the mortgage giant said.

Sub-3% rates are boosting real estate demand and fueling bidding wars. U.S. home prices jumped more than 2% between May and July, the largest two-month gain on record, as Americans emerging from COVID-19 lockdowns bought real estate, the Federal Housing Finance Agency said in a Wednesday report.

“Historically low interest rates are the primary driver behind the strength in housing demand that we’ve seen in recent months, and that has led housing to be a bright spot for the overall economy,” Robert Dietz, chief economist of the National Association of Home Builders, said in an interview.

Rates started tumbling after the Federal Reserve committed to buying mortgage-backed securities in March to keep credit flowing amid the worst pandemic in more than a century. Because of that, the average U.S. rate for a 30-year fixed mortgage, as measured by Freddie Mac, has hit new lows nine times since COVID-19 first started spreading in America.

Sales of existing homes rose to a 14-year high of 6 million at an annualized pace in August, the National Association of Realtors said in a report on Tuesday.

Combined sales of single-family houses, townhomes, condominiums and cooperatively owned apartments rose 2.4% from July, according to the report. Compared to a year ago, last month’s sales were 11% higher, NAR said.

The median existing-home price last month was $310,600, up 11.4% year over year, and prices rose in every region, according to NAR.

Source: housingwire.com

Apache is functioning normally

The average U.S. mortgage rate for a 30-year fixed loan fell to 2.8% this week, another record low, Freddie Mac said in a report on Thursday. The rate fell one basis points from the week prior and is now six basis points lower than the original all-time low set in mid-September.

The average fixed rate for a 15-year mortgage was 2.33%, falling from last week’s 2.35%.

After this week’s dip, there have now been 13 consecutive weeks when average mortgage rates have been below 3%, and rates have broken records 11 times this year.

“Mortgage rates remain very low, providing homeowners who have not already taken advantage of this environment ample opportunity to do so,” said Sam Khater, Freddie Mac’s chief economist. “Mortgage rates today are on average more than a full percentage point lower than rates over the last five years.”

In March, in an effort to buffer the economic blows from the shutdown, Federal Reserve Chairman Jerome Powell announced the Fed would start buying bonds to prevent a credit crunch and make borrowing cheaper. According to Fed data, the central bank has bought over $1 trillion in bonds backed by home loans since then.

While purchase loans are seeing record-low rates, the adverse market fee imposed on refinance loans by the FHFA in August make record lows for those loans unlikely.

During this week’s Mortgage Bankers Association annual event, the heads of Fannie Mae and Freddie Mac discussed the adverse market fee.

“As you know, safety and soundness is one, two, and three for us,” said Fannie Mae CEO Hugh Frater. “And for us to play our role in all markets, good and bad, markets small and large, we have to do it safely and soundly with long-term risk management in mind. And that’s the rationale for this change, as the GSEs are shouldering significant risks associated with the pandemic — as the principal risk taker, we have to price that risk appropriately.”

He added that while the housing market has demonstrated real resiliency, “many millions of borrowers are under stress, there’s still significant risk caused by economic uncertainty both in the near term and the longer term. And we’re required by law and regulation to be compensated for these risks and these costs.”

Freddie Mac CEO David Brickman struck a similar tone, saying that the GSEs have provided “extraordinary support” to the market.

“Costs have changed, risks have changed. What we put in place is an appropriate and prudent response to that change in the external environment for us to support struggling homeowners.”

They both noted that with interest rates still low, borrowers will realize savings, even with the 50 basis point refinance fee factored in. “But obviously, anybody who’s refinancing their mortgage at a lower rate is already beginning to save in terms of their mortgage payments, this only means they save just a little bit less than they would have otherwise,” said Brickman.

Source: housingwire.com

Apache is functioning normally

The average U.S. mortgage rate for a 30-year fixed loan remained steady this week, gaining one basis point to 2.81%, Freddie Mac said in a report on Thursday. The average fixed rate for a 15-year mortgage was 2.32%, falling from last week’s 2.33%.

After this week’s dip, there have now been 14 consecutive weeks when average mortgage rates have been below 3%. According to Freddie Mac’s chief economist, Sam Khater, low rates have provided tangible support to the economy at a critical time.

“Strong purchase demand is helping to lift the construction, manufacturing and transportation industries that build new homes and it is also leading to more consumer spending for owners, who are selling or improving their
homes,” said Khater. “On the refinance front, many consumers are smartly taking advantage of the ability to lower their monthly payment, which means they can spend, save or pay down debt more so than they have in the past.”

The Federal Reserve began buying bonds in March to buffer the shutdown’s economic blows and make borrowing cheaper, and consistently low and steady mortgage rates have pushed homebuyers to flood the market. On Wednesday, Case-Shiller’s home price index for August jumped 5.7% – the greatest year-over-year gain since 2018.

According to Mike Fratantoni, chief economist of the Mortgage Bankers Association, today’s GDP data shows a picture of the economy re-opening and restocking over the summer.

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“MBA expects that the pace of economic growth will slow in the fourth quarter and into next year, but expansion should nonetheless continue, provided the current spike in virus cases does not lead to another complete lockdown,” Fratantoni said.

While one end of the market continues to flourish from demand, 34% of home sellers said they are staying out of the market due to COVID-19’s uncertainty in a recent Zillow survey, and approximately 3 million homeowners are currently in forbearance plans, according to the MBA.

“This is further evidence of the unevenness in the current economic recovery,” said Fratantoni. “The housing market is booming, as shown by the extremely strong pace of home sales last week. However, many homeowners continue to struggle, as the pace of the job market’s improvement has waned.”

Source: housingwire.com

Apache is functioning normally

The average U.S. mortgage rate for a 30-year fixed loan rose this week to 2.84%, Freddie Mac said in a report on Thursday – up 6 basis points from the previous all-time record low set last week.

The average fixed rate for a 15-year mortgage also gained slightly by 2 basis points to 2.34%.

Despite this week’s rise, there have still been 16 consecutive weeks when average mortgage rates have been below 3%. However, this week’s slight gain was most likely a result of positive news about a COVID-19 vaccine, said Sam Khater, Freddie Mac’s chief economist.

“Despite this rise, mortgage rates remain about a percentage point below a year ago and the low rate environment is supportive of both purchase and refinance demand. Heading into late fall, the housing market continues to grow and buttress the economy,” Khater said.

In an effort to buffer economic blows, the Federal Reserve began buying bonds in March to make borrowing cheaper – eight months later and those rates are still feeding a frenzied market despite upward pressure on home prices.

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How long these low rates will last is still up for debate, but in September, 13 members of the Federal Reserve’s Federal Open Market Committee said they expect to keep the central bank’s benchmark rate near zero through 2023.

Fannie Mae’s Home Purchase Sentiment Index, a composite index designed to track the housing market and consumers’ desire to sell or buy a home, also revealed consumers and the industry alike are confident that a low rate environment will hold. Those who believe they will rise in the coming 12 months dropped to 32%, and 49% now believe they will stay the same – up from 44% in September.

Doug Duncan, Fannie Mae’s senior vice president and chief economist, noted much like the 2016 election, the 2020 election may have lasting and unexpected impacts on the market over the coming months. However, observers from across the housing and mortgage space said interest rates will continue to hover near historic lows for the next several years, regardless of who occupies the White House.

Source: housingwire.com