Posted July 28, 2014Tweet
Mortgage rates are dropping nationwide.
Last week, mortgage rates continued their year-long winning streak. After peaking in the mid-4s last September, 30-year mortgage rates have move steadily lower. Rates are down close to 0.50 percentage points and many lenders now quote rates in the 3s.
Buying a home or refinancing one? It's a good time to compare today's live mortgage rates.
Mortgage-backed securities (MBS) were mostly unchanged last week, which helped 30-year mortgage rates remain near their best levels in 14 months; according to Freddie Mac, the 30-year mortgage rate now averages 4.13%.
Mortgage rates are the lowest they've been since June 2013. That action can be directly traced to the MBS market. The MBS market is where mortgage rates are "made".
When the price of mortgage-backed securities rises, mortgage rates drop. This is because bond prices and bond yields move in opposite directions. Conversely, when the price of mortgage-backed securities falls, mortgage rates rise.
The price of mortgage-backed securities is based on demand and supply and, lately, demand has outpaced supply across most MBS types, of which there are three main issuances.
The first main issuances is the Fannie Mae mortgage bond. Fannie Mae mortgage bonds are linked to mortgage rates for Fannie Mae-backed loans. Fannie Mae backs the largest percentage of new loans in today's marketplace.
The second main issuance is the Freddie Mac mortgage bond.
Freddie Mac mortgage bonds are similar to Fannie Mae MBS, but they back Freddie Mac loans instead. Together, Fannie Mae and Freddie Mac loans are known as "conventional loans". Conventional loans are managed by the Federal Housing Finance Agency (FHFA).
Like Fannie Mae and Freddie Mac bonds, Ginnie Mae MBS have been improving in price. Rates for all five mortgage types are the lowest they've been this year, with many lenders now quoting rates in the 3s.
This year's mortgage rates are defying the experts.
At the start of the year, Wall Street predicted that rates would rise into the 5s before June; that purchase business would dry up; and that refinance chances would suddenly go scarce.
Nearly two-thirds through the year, Wall Street is being proven incorrect. Rates are down nearly 0.50 percentage points from January 1 and, at today's mortgage rates, a $300,000 mortgages costs $70 less per month as compared to the start of the year.
The drop has re-opened refinance opportunities, too.
Savvy homeowners are lowering their mortgage rates and their monthly payment via refinance, but the group which is getting the biggest benefit, perhaps, is today's FHA-backed homeowner.
The FHA offers a special refinance program known as the FHA Streamline Refinance. The FHA Streamline Refinance waives many of the traditional verifications which accompany a refinance.
According to the program's official guidelines, with the FHA Streamline Refinance, there is no income verification, no credit score verification, and no home appraisal required.
One of the FHA Streamline Refinance's only requirements is that the refinancing homeowner must save at least five percent monthly via a refinance.
As an illustration, if your current FHA mortgage payment is $1,000 monthly, you cannot refinance unless your new FHA mortgage payment will be $950 or less. It's easier to meet this requirements when mortgage rates are low -- like they are today.
However, today's FHA-backed homeowners have a second refinance opportunity.
Because home values are rising in many U.S. markets, tens of thousands of FHA-backed homeowners now have sufficient home equity to refinance away from the FHA and into a conventional loan via Fannie Mae or Freddie Mac.
There are two reasons to consider such a move.
The first is that mortgage insurance costs on a conventional loan are often lower than for a comparable FHA-backed loan, which can save hundreds of dollars monthly.
The second reason to refinance out of an FHA loan is that, for all new FHA loans, FHA MIP is required for at least 11 years. By contrast, with a conventional loan, mortgage insurance is only required until there's 20% equity.
This makes today an ideal time to refinance away from an FHA loan. Mortgage rates are great and the long-term costs will likely be much lower.
Mortgage rates will be volatile this week. There economic release calendar is full; the Federal Open Market Committee is meeting; and, the Non-Farm Payrolls report will be released on Friday.
It will be hard to rate-shop this week, so be aware of what's ahead. Mortgage rates are expected to change multiple times per day and could swing by as much as 0.250 percentage points.
The week's economic calendar looks like this :
The Federal Open Market Committee will adjourn at 2:00 PM ET Wednesday and issue its customary press statement at that time. The Fed is expected to continue its tapering of its stimulus programs; and to announce that rates are expected to stay low until mid-2015, at least.
The Fed rarely delivers the precise message Wall Street expected, though. The distance from which the central banker deviates from expectations will determine how fast and by how much mortgage rates will change. Unfortunately, we can't know if mortgage rates will rise or fall.
A similar pattern is expected for Friday's job report. Therefore, be ready to lock your mortgage rate at a moment's notice. Low mortgage rates may not last.
Despite low mortgage rates, comparison shopping for the lowest mortgage rate may be difficult this week. The Federal Reserve is meeting and the Non-Farm Payrolls report is set for release. Both can affect rates dramatically. Consider shopping early in the week, and locking something in.
See today's rates now. Rates are available online for free with no social security number required to get started, and with no obligation to proceed.
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.
Marie M. Real Estate Agent
I have been a Realtor for more than 30 years and enjoy The Mortgage Reports. It's terrific to learn something new almost every day.
Sandi C. Customer Service Representative
The Mortgage Reports has been extremely helpful in educating me about mortgages, and what is available. Thank you for all that you do!
Jerolyn C. CPA
The Mortgage Reports isn't just basic mortgage rate information -- it's analysis on rate changes and trends, and updates on the laws in lending. Subscribing to the site's daily updates is worthwhile.
2014 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.