Patterns In Mortgage Rates : Rates Move Higher Post-Thanksgiving
If you're shopping for a mortgage, it may be time to lock that rate. Mortgage rates have tended to rise post-Thanksgiving so the longer you wait, the more you may pay.
Conforming, FHA, VA or jumbo -- rates may never be this low again.
Mortgage Rates Now At "Ridiculous" Levels
2012 has been terrific year for mortgages. Rates fell below 4.00% to start the year and have dropped to levels we can only characterize as "ridiculous". For home buyers, the result is an increase in purchasing power of 26 percent as compared to a year ago.
Existing homeowners have fared well, too. Falling rates have boosted refinance activity nationwide and, last quarter, the typical refinancing household saved 25.5% on their mortgage payment.
Furthermore, new mortgage products aimed at underwater homeowners have rendered millions of U.S. households eligible to refinance into today's low rates.
Four such changes to "underwater mortgage" programs :
- The HARP refinance program was overhauled to allow for unlimited loan-to-value
- The FHA Streamline Refinance was reworked to help lenders make more loans
- The VA Streamline Refinance (IRRRL) was loosened to allow loans up to $729,750
- The USDA Streamline Refinance program waived credit scores and home appraisals
Because of these changes, homeowners in previously hard-hit areas such as Phoenix, Arizona; San Jose, California; and Miami, Florida are getting access to the lowest rates of a lifetime and many are taking advantage.
More than 1,000,000 households will refinance via HARP this year, for example, with the typical HARP household benefitting from a 34% reduction in their monthly mortgage payment.
How are savings like this possible? Lots of things are possible when the average 30-year fixed rate mortgage rate drops to 3.31 percent.
Meanwhile, FHA and VA mortgage rates are even lower than that.
Mortgage Rates : A Thanksgiving Day Reversal?
Mortgage rates are ultra-low today, but the clock to lock them may be ticking.
Watching mortgage rate patterns, by the end of this week, rates across all products and states will begin to move higher. It's how markets have worked since the collapse of Lehman Brothers and Merrill Lynch in 2008.
The pattern goes like this.
First, beginning in late-November with the start of holiday shopping season, the calls for "economic recovery" begin. We heard it at the end of 2009, as we heard it at the end of 2010, as we heard it at the end of 2011. Consumer spending increases through the holiday season, and year-end optimism goes in bloom. In response, mortgage inch higher as Wall Street seeks investment risk.
This patterns continues through December and January.
Then, in February, March and April, with consumer spending levels rising, the ranks of the employed do, too. Businesses start hiring and the jobs report reflects rising economic optimism.
- Average job growth, February through April, 2010-2012 : +191,000 per month
- Average job growth, All other months, 2010-2012 : +113,000 per month
The spring hiring binge drives even more investors out of bonds, and mortgage rates have run higher until mid-April.
Then, coincidentally (or not), with the last three Aprils being unkind to Europe, investors have used that month to move back into U.S. mortgage bonds, triggering a 7-month slide through which mortgage rates plunge and refinance activity soars.
It's why mortgage rates are at all-time lows even today.
Strangely, Europe has been befelled by three separate "events" in each of the last three Aprils, each which has helped to lower U.S. mortgage rates for buyers and would-be refinancing households.
- In 2010, the volcanic eruption of Eyjafjallajökull interrupted European economic output
- In 2011, it was Greece and its sovereign debt crisis
- In 2012, it's the long-term doubt that's been cast over the Eurozone's future
Political and economic uncertainty within Europe has mortgage rates down these days. But -- as in 2010 and 2011! -- the end of the year is a time of hope. Greece (and Spain and Italy) appear to be stepping forward and the European Stability Mechanism is preparing to make market-sentiment-changing bailouts as needed.
When this happens, safe haven patterns unwind and mortgage rates rise. It happens every year.
Get Today's Mortgage Rates Now
If you're shopping for a mortgage rate now, then, expect for rates to be low. At least until the day after Thanksgiving. That's when the first reports of holiday consumer spending are made. Plus, Europe is inching closer to resolving its crises in Greece and Spain.
Combined, these events will cause mortgage rates to rise.
Remember : Historically, 30-year mortgage rates have averaged in the 7s. Today, we're in the 3s. There is a lot more room for rates to rise than to fall. And when rates rise after recession, they tend to rise quickly.
Such is the nature of mortgage rates. Especially with Thanksgiving coming later this week.