Posted March 4, 2013Tweet
Mortgage-backed securities (MBS) improved last week, helping mortgage rates to drop for the first time in six weeks.
The FNMA 3.0% coupon and the GNMA 3.0% coupon both climbed, lowering conforming mortgage rates and FHA mortgage rates, respectively.
Jumbo mortgage rates dropped, too, continuing a multi-week winning streak for loans exceeding $625,500.
This week, however, with February's jobs data due for release and the federal sequester underway, mortgage rates may reverse higher. The market looks ripe for a rate lock.
Conforming mortgage rates dropped last week. Freddie Mac's weekly survey of 125 banks showed the average 30-year fixed rate mortgage rates easing 0.05 percentage points to 3.51% nationwide for mortgage applicants willing to pay 0.8 discount points plus a full set of closing costs.
Last week's drop in rates was the first since mid-January. In the six weeks since, rates have climbed 1/8 percent and the required number of discount points has climbed by one-tenth of one percent.
Discount points are one-time, up-front closing closing costs. 1 discount points is equal to one percent of the loan size. A homeowner in Fairfax, Virginia, therefore, borrowing at the local conforming loan limit of $625,500 and wanting a 3.51% mortgage rate, should expect to pay $5,004 in discount points.
Borrowers not wanting to pay discount points should expect higher rates from their lender, as should applicants for "special" loan programs including the government's HARP 2.0 refinance for underwater homeowners; and homeowners seeking mortgages under the 5-10 Properties Program.
FHA mortgage rates dropped last week, too.
Last week, the Census Bureau and the National Association of REALTORS® released the January New Homes Sales report and Pending Home Sales Index, respectively. Both releases show that the 2012 housing market finished strong, and that the 2013 market is powering ahead.
In addition, home prices were shown to be rising faster than expected nationwide. However, the week's biggest story will be the Friday release of February's Non-Farm Payrolls report.
Jobs are paramount to the U.S. economic recovery and more than 4.3 million jobs have been added since October 2010. During that same time frame, the national jobless rate has dropped to 7.9%.
For February, Wall Street is expecting 195,000 net new jobs created and a drop in the Unemployment Rate to 7.6%. Should job growth be positive, it would mark the 29th straight month that the jobs economy has expanded -- a statistic closely watched by Wall Street.
Jobs growth begets more job growth which boosts both consumer and business spending. As profits increase, stocks win favor over "safer" investments, including mortgage-backed bonds, causing mortgage rates to rise.
An especially strong February jobs report would likely send rates soaring. A weak result, however, may be ignored. This is one reason why there's more risk in floating a mortgage rate this week than locking one. If you're shopping for a home loan, consider locking quickly.
The jobs report hits Friday at 8:30 AM ET.
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.
Barry L. Systems Analyst
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2014 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.