Mortgage interest rates were mixed last week.
The Fannie Mae 3.5% mortgage bond, which is linked to conforming mortgage rates, fell -11/32 between Monday and Friday -- roughly 34 basis points to price. This is bad news for HARP mortgage applicants and other refinancing households who now face higher loan costs; as well as for today's home buyers using conventional home loans to finance a purchase.
The Ginnie Mae 3.5% coupon, however, improved, climbing +4/32. Ginnie Mae bonds are linked to rates for FHA loans, VA mortgages, and USDA home loans. Pricing on these loans is better by approximately 14 basis points.
Nationwide, mortgage rates remain below 4.25 percent.
Freddie Mac reported 30-year fixed rate mortgage rates rising 0.06 percentage points to 4.20% this week nationwide. The rate is available to borrowers willing to pay 0.6 discount points at closing, plus normal closing costs.
Discount points are optional, one-time closing costs. 1 discount point comes at a cost equal to one percent of your loan size such that 0.6 discount points costs $600 per $100,000 borrowed.
Applicants who choose to pay discount points get access to lower mortgage rates than applicants choosing to waive discount points.
Buyers waiving discount points don't get Freddie Mac's published 4.20% 30-year fixed rate -- they get something a little bit higher. Today's loans with no points are nearer to 4.375%.
That's lower than rates from the start of the year.
On January 1, 2014, mortgage rates were at a 16-week high. Rates had been moving higher as the domestic economy showed signs of improvement; as global markets were expanded; and, as the Federal Reserve prepped to reduce its market stimulus footprint.
Since the New Year, however, the U.S. economy has side-stepped and key global economies such as China have shown signs of a slowdown. In addition, conflict in Ukraine has weighed on markets, sparking a bout of safe-haven buying, which has benefitted U.S. mortgage bonds.
If you're shopping for a mortgage or looking for the lowest rate, be sure to compare lenders. Pricing can vary between banks. Some lenders now offer rates in the 3s.
Mortgage rates have moved downward, steadily and slowly, since the start of the year. 30-year mortgage rates averaged 4.53% on January 1, and had moved to as low as 4.12% two weeks ago.
Rates now average 4.20 percent nationwide. This week, however, rates could resume falling. This is because, at 2:00 PM ET Wednesday, the Federal Open Market Committee (FOMC) will adjourn from its fourth scheduled meeting of the year -- a two-day, closed-door affair which begins Tuesday morning.
Don't expect the Federal Reserve to move "off-course".
The group will likely vote to keep the Fed Funds Rate within its current target range near zero percent, where it's been since December 2008; and it will likely move to "taper" its third round of quantitative easing (QE3) by another $10 billion.
A $10 billion taper would be the Fed's fourth such taper in six months, and would reduce the cumulative size of QE3 to $45 billion.
In theory, reducing the size of QE3 would lead mortgage rates higher. However, since the QE3 taper began, mortgage rates have managed to drop; the result of safe-haven buying and a smaller pool of available mortgage bonds.
Investors are buying U.S. bonds at a faster pace than the Fed can exit the market.
Incidentally, a similar pattern emerged when the original QE ended in 2009, and when QE2 ended two years later. Mortgage rates fell despite analyst calls for an increase.
Mortgage rates have dropped close to 0.375 percentage points since the QE3 taper started.
Mortgage rates will have ample opportunity to move this week -- up or down. The economic calendar is stacked, and it includes a meeting of the Federal Open Market Committee.
Any time the Fed meets, mortgage rates can bounce.
The complete weekly calendar is as follows :
Rate shoppers should also be attuned to Federal Reserve Chairman Janet Yellen's post-FOMC meeting press conference. The Chairman will face questions from members of the press and her answers may influence the future direction of mortgage rates.
In general, comments which suggest that the U.S. economy is slowing, or that inflation rates are expected to remain low, may result in mortgage rates moving lower. By contrast, comments indicated a strong U.S. economy and high rates of inflation would lead mortgage rates up.
It's been a good few weeks for mortgage rates. Pricing has improved from the start of the year and may continue to drop into late-June and July. Or, after the Fed meeting, we may discover that this is the lowest the Fed will want rates to go.
So, get today's rates and see for what you'll qualify. 30-year mortgage rates are pricing well and so are 15-year rates. Get a live mortgage rate quote at no cost, with no obligation, and with no social security number required to get started.
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, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)