It's been a rough few months to lock a mortgage rate, but we sort expected this. For the fourth straight year, U.S. mortgage rates are rising through winter.
It's a pattern some saw coming, and one that's worth watching. The trend suggests mortgage rates will move higher through March and April.
If you're shopping for a home loan, consider acting quickly. This may be as good as rates get for a while.
Mortgage rates have made a terrible start to 2013.
On January 1, the average 30-year fixed-rate mortgage was 3.34 percent with an accompanying 0.7 discount points. Then, markets went bad.
First, the so-called "Fiscal Cliff" was avoided, which helped boost economic projections for 2013. Then, with the debt ceiling debate shelved, the U.S. economy showed even more signs of improvement, led by blowout housing data and a strong jobs market.
Furthermore, the global economy showed itself to be on more solid footing, led by strong results within the Eurozone.
These specific improvements were a big deal because it was precisely the weakness in these above categories which led to last year's historically-low mortgage rates. As each area strengthens, investors are choosing to swap their "safe" investments for more risky ones.
It's the reverse of "safe haven buying" which characterized the mortgage market between May and November of last year (and the two years prior). Wall Street is now a net seller of bonds and a net buyer of equities. This sentiment reversal has pushed both the Dow Jones Industrial Average up 8 percent since the start of the year, and has sank mortgage bonds to multi-month lows.
Since January 1, conforming mortgage rates are higher by nearly one-quarter percentage point.
Mortgage rates have increased on the majority of calendar days this year, peaking at 3.56 percent, on average, nationwide for borrowers willing to pay closing costs and points. For borrowers wanting loans with zero closing costs, rates are closer to 4 percent.
Rates should continue to climb.
There has now been 28 consecutive months of U.S. job growth, a period during which 4.4 million net new jobs have been created. Furthermore, the number of first-time jobless claims has been steadily dropping -- another sign of an improving jobs market.
Jobs matter to the economy because, with more employed persons, more taxes are paid, more money is spent, and more hiring occurs. More working citizens can also correlate to higher demand for homes which can move the economy forward as well.
In response to the improving economy, the Federal Reserve has suggested a timetable against which it will begin to remove market stimulus. This, too, has contributed to rising mortgage rates.
However, the mortgage-backed bond market does remain precariously balanced. A single unexpected event could reverse market sentiment, which would lead mortgage rates lower once again. Events like these have occurred in April during the last three years of trading -- it can certainly happen again this year.
For 2013, no new "crisis" has emerged to lead mortgage rates lower and start a reversal -- at least not yet. Should one occur, however, and should it be euro-related and far-reaching, we can expect it to re-ignite the flight to quality assets which tends to lead U.S. mortgage rates lower.
There is an early candidate in Italy's anti-austerity vote, plus mass protests in Portugal against the same. These events could be a spark to re-ignite safe haven buying. Or, they could quickly pass over.
This year's home buyers and refinancing households can hope, anyway -- especially the FHA-insured homeowners wanting to refinance ahead of the new FHA mortgage insurance premiums.
The FHA changes go into effect April 1, 2013.
If you're shopping today's mortgage rates, you've likely noticed changes in the market. Rates are steadily rising for all types of loans, and rates are changing quickly, too.
Be safe about your mortgage rate. Get a quote, complete with closing costs. If the numbers fit your personal budget and the mortgage meets your needs, consider locking that rate in -- it won't likely last.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2015 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.