Five months into 2016, mortgage rates continue to defy Wall Street predictions.
According to Freddie Mac's weekly mortgage rate survey, 30-year mortgage rates held low last week, closing the month at 3.66%, on average, nationwide.
30-year mortgage rates are now close to 40 basis points (0.40%) since the start of the year. 15-year mortgage rates are down a similar amount.
If you purchased a home within the last year, or if your mortgage is more than a few years old, your current mortgage rate is likely higher than today's available rates.
More than 7 million U.S. homeowners are potentially eligible to refinance. And, if you're buying a home, it's a good time to be looking.
Because of how mortgage rates have dropped, if you could afford a $400,000 home in December, today, you can afford a home for $420,000 -- an increase of 5% to your purchasing power.
It's a good time to take a look at today's low rates.Click to see today's rates (Jul 30th, 2016)
The average conventional 30-year fixed rate mortgage is 3.66%, according to Freddie Mac's Primary Mortgage Market Survey (PMMS).
The Freddie Mac rate is available to "prime" borrowers paying an accompanying 0.6 discount points at closing.
Discount points are a one-time loan cost, where one discount point carries a cost equal to one percent of your first mortgage loan size amount.
For example, 1 discount point on a Miami, Florida loan at the mortgage loan limit of $417,000 would carry a cost of $4,170 to be paid at closing.
Discount points, which are typically tax-deductible, can be paid with cash or they can be added to your loan size for you.
Note, though, that Freddie Mac's weekly mortgage interest rate survey applies to conforming loans and conventional mortgage rates only. FHA mortgage rates and VA mortgage rates are not surveyed as part of the report; nor are mortgage rates for USDA loans.
Rates for these other loan types are even lower.
All of this makes it easier for today's refinancing homeowners to qualify for streamlined loans such as the FHA Streamline Refinance, the VA Streamline Refinance, and the USDA Streamline Refinance.
Streamlined refinance loans can close in as few as 30 days because of reduced paperwork requirements and appraisal waivers. Streamlined refinances are simpler for banks to underwrite and approve.Click to see today's rates (Jul 30th, 2016)
Today's mortgage rates are well-entrenched in the 3-percent range -- which is terrific news for active mortgage applicants.
Loans now cost just $458 monthly for every $100,000 borrowed, excluding escrows for taxes and insurance; and, private mortgage insurance (PMI), where applicable.
Editor's Note: PMI is neither good nor bad.
It should be noted, though, that, although mortgage rates are low today, they may not stay low for long. Mortgage rates change quickly with the economy, and with shifts in market sentiment.
Mortgage-backed securities (MBS) -- the Wall Street asset upon which mortgage rates are "made" -- have been erratic of late, which has rates on shaky ground.
MBS pricing is currently responding to influences on the economy, including the Federal Reserve, the jobs market, and developments in nations abroad (e.g.; China, Eurozone).
In May, mortgage rates could quickly rise into the fours and stay there; or, shoppers may find rates retreating deeper into the threes.
Your luck with the month's mortgage rates will be part-economy, part-psychology, and part good fortune.
Here are some stories of the most relevant stories to watch.
Last month, the Non-Farm Payrolls report showed 215,000 net new jobs added to the economy. Accounting for revisions to the months prior, this was more than economists expected.
However, since 2010, more than 13 million jobs have been added in the economy overall and the unemployment rate has dropped as low as 4.9 percent.
Furthermore, recently, wage growth appears to be increasing. This is important.
An increase in wages tends to leads to increased consumer spending, and can be a pre-cursor to inflation. Inflation is bad for mortgage rates.
To date, wage growth has had little effect on inflation, and it could be months or years before it does. Or, wage growth could be affecting inflation already -- we can't really know because of changes in the economy don't occur overnight.
This is why the upcoming release of the April Non-Farm Payrolls report should be a point of caution for today's mortgage rates shopper.
The report, which hits May 6, will have an outsized influence on this month's mortgage rates. Evidence of a stronger jobs market -- especially with respect to wages -- may give the Federal Reserve confidence to raise the Fed Funds Rate at its next meeting, scheduled for mid-June.
Economists expect to see that the economy added 200,000 net new jobs last month. The Non-Farms Payroll report releases Friday, May 6 at 8:30 AM ET.
Inflation rates are another influence on today's consumer rates. As inflation rates rise, the Fed is more inclined to raise the Fed Funds Rate, which can cause mortgage rates to move.
Inflation is the enemy of low mortgage rates.
Inflation works against low rates because inflation is the literal devaluing of the U.S. dollar. This, in turn, devalues everything denominated in U.S. dollars -- including mortgage-backed bonds.
When inflation pressures grow, mortgage rates often rise.
Since 2012, inflation rates have been stable but beneath the Federal Reserve's target rate of two percent -- sometimes, stubbornly. When inflation rates run too low for too long, disinflation can occur.
Disinflation, which is more commonly called "deflation", is linked to falling mortgage rates.
Beginning in 2009, the Fed began to take steps to stimulate the economy and avoid disinflation but, to date, those efforts have yet to have their desired effect.
And now, with oil prices low and the dollar keeping value worldwide, some fear that Cost of Living indices will begin to show price drops instead of increases.
Recent data puts the annual inflation rate just above one-and-a-half percent annually.
The Fed acknowledges low inflation rates as a near-term issue, but believes that inflation rates will return to a more stable range in the medium-term.
It's unclear how long of a period of time "medium term" is.
Expect a push-pull on inflation/disinflation forces throughout the coming weeks. Rising rates of inflation will typically cause mortgage rates to rise. Receding rates of inflation will typically lead mortgage rates lower.
If the dollar strengthens, demand for mortgage bonds is expected to increase which could actually offset the effects of an increase in the Fed Funds Rate.
Weakness in non-U.S. economies should also affect this month's mortgage rates.
In general, as global economies weaken, U.S. mortgage rates improve. This is the result of an investing pattern known as a flight-to-quality.
"Flight-to-Quality" describes, during periods of economic or political uncertainty, the flow of money from risky assets toward safe ones. Investors seek safe assets to protect their principal investments, and to shield against loss.
This pattern is also known as safe-haven buying.
U.S. mortgage bonds are among the safest investment classes in the world. So, when war is imminent; or, when nations such as China face an uncertain future; or, when oil prices threaten tens of thousands of jobs, mortgage rates fall.
Investment in the U.S. dollar has been strong, too, which also helps mortgage interest rates to drop.
This is because mortgage rates are based on the price of mortgage-backed securities (MBS), which are priced in U.S. dollars. As the value of the dollar rises, so does the inherent value of owning MBS. This drives demand for mortgage bonds higher which leads prices up.
When bond prices rise, mortgage rates drop.Click to see today's rates (Jul 30th, 2016)
This week, the U.S. economic calendar is thick, including Friday's release of the Non-Farm Payrolls report. Expect for markets to be erratic and mortgage rates to jump as Friday morning gets nearer.
The complete calendar for this week reads :
The week's big event is Friday's Non-Farm Payrolls release. Interest rates will be erratic through Friday morning, but are subject to big swings after the report's release.
Remember: Mortgage interest rates change quickly and often without notice. It's a good, safe time to lock a low rate. Today's mortgage rates may not last.
Mortgage rates are currently below 4 percent. Home buyers have excellent purchasing power at today's rates; and refinancing households can save more cash with a refinance.
Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Click to see today's rates (Jul 30th, 2016)
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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2016 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)