What’s Ahead For Mortgage Rates This Week – March 10, 2014

Whats Ahead For Mortgage Rates March 10 2014Last week’s economic news included construction spending and the CoreLogic Home Price Index for January.  Reports for February included ADP Employment, Non-Farm Payrolls and national unemployment data.

The Federal Reserve’s Beige Book report and weekly reports on mortgage rates and new unemployment claims rounded out the week’s economic news.

Highlights for last week include:

Consumer spending gained 0.40 percent for January. The expected reading was 0.20 percent and the reading for December was flat.

The Commerce Department reported that increased spending was less an indicator of consumer discretionary spending than an indicator of high utility costs caused by severe winter weather.

Construction spending ticked upward in January with gain of 0.10 percent as compared to expectations of -0.40 percent and the prior month’s reading of 0.10 percent.

January’s reading translates to a seasonally adjusted annual figure of $943.1 billion.

Federal Reserve: Winter Weather Obscures Accurate Economic Outlook

According to the Fed’s Beige Book report, much of the U.S. economy was impacted by severe winter weather. The report is based on anecdotal information provided by business contacts and industry leaders throughout the 12 regions of the U.S. Federal Reserve System.

Eight regions reported slow economic growth. Janet Yellen, chairwoman of the Fed, noted that winter weather was not expected to alter the Fed’s plan to continue reducing its asset purchases under its quantitative easing program. She also said that it may be months before accurate economic readings can be obtained in the aftermath of winter weather conditions.

Freddie Mac’s Primary Mortgage Market Survey brought good news on Thursday as mortgage rates fell across the board and discount points were also lower in most cases.

Average mortgage rates were down nine basis points for a 30-year fixed rate mortgage at 4.28 percent. The average rate for a 15-year fixed rate mortgage was 3.32 percent, a decrease of seven basis points.

The rate for a 5/1 adjustable rate mortgage was 3.03 percent, down by two basis points from the prior week. Discount points were unchanged for 30-year fixed rate mortgages at 0.70 percent, but dropped to 0.50 percent for 15-year fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

Employment Sector: Surprise Results

The ADP payroll report showed a reading of 139,000 jobs added in February as compared to the prior month’s 127,000 jobs. ADP tracks private sector jobs. The BLS released its Non-Farm Payrolls report for February, which also surpassed expectations.

175,000 jobs were added against expectations of 140,000 jobs added and January’s reading of 129,000 jobs added. The national unemployment rate rose to 6.70 percent against an expected drop to 6.50 percent from January’s reading of 6.60 percent. Once again, foul weather was seen as a major influence.

Whats Ahead This Week

This week’s economic news schedule is relatively light with no releases set for today.

Mortgage rates will be released by Freddie Mac on Thursday, along with weekly jobless claims. Retail sales and the University of Michigan consumer sentiment index round out next week’s schedule.

Should I Shorten My Mortgage Term, Important Factors To Consider

When you first bought your home a few years ago, perhaps you started off with a 30 year mortgage. Now, you are considering refinancing and changing it to a 20 year or even a 15 year mortgage.

Shortening your mortgage term and refinancing can be a smart financial move, but before you make this decision there are a number of factors that you should consider.

Switching to a shorter mortgage will mean that your monthly payments will be higher, but you will be 100% paid off much sooner and you will save thousands of dollars in interest rates. Here are a few of the factors to consider before making this decision:

Has Your Situation Improved?

Perhaps you have moved to a higher paying position, allowing you to earn a higher income and pay off more of your mortgage every month? Or maybe you have received an inheritance, which will help you to make the payments? Perhaps your expenses have gone down and you will have more money left over from your wage?

Whatever the reason, if your financial situation has improved you might want to consider switching to a shorter mortgage. With your spare money, you will be able to make the larger payments and get your house paid off sooner.

Is The Improvement Long Term?

However, it is important to consider whether this improvement will last for the long term. Will your higher wage stay that way for the next several years? Are there any hidden expenses that you are failing to factor in?

You might be set up to repay larger monthly amounts on your mortgage at the moment, but you don’t want to set yourself up for failure in the future if your finances change.

What Are The Refinancing Costs?

Keep in mind that refinancing often comes with costs and fees, so make sure that you subtract these when you are making your calculations. It can sometimes take at least two or three years to recoup the fees, so make sure that you don’t plan on selling your home in the short term.

Can You Get A Better Rate?

One of the advantages of refinancing to a shorter mortgage is that you can sometimes get the opportunity to find a better rate. Perhaps if you have an adjustable rate you will be able to convert it to a fixed rate. Take a look at what is available and ask your financial advisor for help.

These are just a few important factors to consider when it comes to shortening your mortgage term. For more info about your home, contact your trusted mortgage professional.

What’s Ahead For Mortgage Rates This Week – January 13, 2014

What’s Ahead For Mortgage Rates This Week – January 13, 2014The first post-holiday week of 2014 brought mixed economic and housing-related news. CoreLogic reported via its Housing Market Index that November home prices grew by 11.80 percent year-over-year.

This was just shy of October’s year-over-year reading of 11.90 percent. As with Case-Shiller’s recently reported Home Price Indices, a slower rate of home price growth suggested to analysts that the housing market is cooling down.

The Federal Reserve’s Federal Open Market Committee released the minutes from its December meeting. The minutes reiterated the Committee’s decision to begin tapering its asset purchases this month.

The Fed announced that it would reduce its monthly asset purchases by $10 billion to $75 billion. As always, the Fed indicated that it would continue monitoring economic data for determining future actions concerning monetary policy.

Mortgage Rates Mixed

Freddie Mac’s Primary Market Survey reported mixed results for average mortgage rates last week. The rate for a 30-yer fixed rate mortgage dropped to 4.51 percent from 4.53 percent with discount points lower at 0.70 percent; the rate for a15-year fixed rate mortgage was 3.56; this was one basis point higher than for last week.

Discount fell from 0.70 to 0.60 percent. The rate for a 5/1 adjustable rate mortgage jumped by 10 basis points to 3.15 percent with discount points unchanged at 0.50 percent.

Employment, Unemployment Data Mixed

The week’s jobs-related readings provided mixed readings for the labor sector. The ADP Employment report for December showed 238,000 private sector jobs added and matched expectations of 215,000 new private sector jobs. December’s reading also exceeded November’s reading of 229,000 jobs added.

The Bureau of Labor Statistics released the Non-Farm Payrolls report for December; it reported 74,000 jobs added in December against expectations of 193,000 new jobs and November’s reading of 241,000 jobs added.

The sharp drop in new jobs during December was partially blamed on poor weather, but analysts also said that it could be a sign of further ups and downs in the U.S. economy.

In a statement given in connection with the December Non-Farm Payrolls report, St. Louis Federal Reserve Bank President James Bullard, a member of the FOMC, said that he did not expect the Fed to stop tapering its asset purchases due to December’s sharp drop in new jobs.

The national unemployment rate improved to a reading of 6.70 percent. This was the lowest reading in five years and only two-tenths of a percent above the FOMC’s targeted unemployment rate of 6.50 percent. 347,000 workers left the workforce, which helps to explain the discrepancy between the lower number of new jobs and the lower unemployment rate.

This Week

This week’s scheduled economic news includes retail sales and retail sales except autos, the Federal Reserve’s Beige Book report, Weekly Jobless Claims, Freddie Mac’s PMMS. The NAHB Home Builders HMI and the Housing Starts report will also be released. Friday’s release of the University of Michigan’s consumer sentiment index rounds out the week.

Dodd-Frank’s Latest Gift: The Qualified Mortgage Rule

Dodd-Frank's Latest Gift: The Qualified Mortgage RuleThe Dodd-Frank Wall Street Reform and Consumer Protection Act’s latest provision – the Qualified Mortgage rule – is going to effect on January 10, 2014.

While, like many of Dodd-Frank’s other features, its ability to protect customers remains to be seen, one of its impacts is already clear. Taking out a home loan just got harder.

The QM rule contains a set of provisions that, if followed, may protect lenders from lawsuits. They will also make it harder for customers to qualify to borrow money to buy a house.

Verifying Incomes

Lenders now have to follow stringent procedures to verify that borrowers can repay their loans. While many home loan lenders are already verifying and documenting borrower incomes, assets and debts, they will have to create additional paperwork to prove that they did their jobs.

DTI Caps

For a loan to be considered a qualifying mortgage, the borrower’s debt-to-income ratio can be no more than 43 percent. This means that if a borrower has $4,500 in gross monthly income, his total debt payments including his new mortgage cannot exceed $1,935 per month.

Previously, some lenders had been willing to go up to 45 percent.

Fee And Term Caps

Lenders will be less able to make creative loans, as well. Loans that meet the QM rule can be no longer than 30 years in length. They also cannot have closing costs and fees that exceed a cap of 3 percent of the loan’s balance.

Who Gets Impacted?

The good news is that the normal borrower taking out the normal loan might not notice the new QM rule. Borrowers that get squeezed are those that need to take out a loan that doesn’t fit the box laid out by the provisions. These include:

  • People in high-cost cities that need 40-year or interest-only mortgages to lower their payments.
  • Self-employed people and contractors that need to be able to borrow money on “stated” income without detailed verification.
  • Borrowers that can afford a loan but have other debts, like student loans.
  • Those that need non-traditional loans with high fees.

While the law still allow a lender to make a loan that isn’t a qualifying mortgage, given that the loan won’t have the same legal protections, its costs remain to be seen. This could end up pricing people with special needs out of the home loan market.

Case Shiller Price Index Shows Highest Year-Over-Year Gains Since 2006

Case Shiller Price Index Shows Highest Year-Over-Year Gains Since 2006The Case-Shiller 10 and 20-City Home Price Indices for October were released on December 31. Although home prices in most cities continued to show year-over-year gains, the pace of home price appreciation is expected to slow in 2014.

Year-over-year increases have been in double digit territory since March 2013, but month-to-month readings suggest that the rate of increasing home prices is slowing.

According to David Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, “…the monthly numbers show that we are living on borrowed time and the boom is fading.”

The 10 and 20 city indices are showing that home prices some cities that were showing little or no growth in 2013 are posting higher rates of appreciation, while growth in cities that have shown very high increases in home prices are beginning to lose momentum.

Year-over-Year Growth In Double Digits

The 10-and 20-city indices each posted year-over year gains of 13.60 percent between October 2012and October 2013. These were the highest year-over-year gains since February of 2006.

Home prices recovered to mid-2004 levels in October, but remained 20 percent lower than peak home prices seen in June and July of 2006.

Here are figures for 10 cities showing the highest increases in home prices year-over-year in October 2013:

City                                                                        Y-O-Y Growth Rate

Las Vegas, NV                                              27.10 %

San Francisco, CA                                         24.60%

Los Angeles, CA                                           22.10%

San Diego, CA                                             19.70%

Atlanta, GA                                                  19.00%

Phoenix, AZ                                                 18.10%

Detroit, MI                                                   17.30%

Miami, FL                                                    15.80%

Tampa, FL                                                   15.20%

Seattle, WA                                                 13.10 %

Home prices in the 10 and 20-city indices have gained 23.10 percent and 23.70 percent since home prices reached their lowest points in March 2012.

Month-To-Month Readings Indicate Slower Growth

Month-to-month readings show a slowing trend in home price growth. 18 of 20 cities included in the S&P Case-Shiller Home Price Indices showed slower growth in October as compared to September’s readings.

The Federal Reserve will begin tapering its asset purchases this month and will continue doing so unless economic conditions slow to a point where the Fed considers tapering counter-productive to economic growth.

Concerns over the tapering of “quantitative easing” and higher mortgage rates are seen as contributing to slower gains in home prices.

Although some analysts have identified indicators of economic growth, most seem to agree that home prices are likely to increase by single-digit percentages in 2014.

What’s Ahead For Mortgage Rates This Week – January 6, 2014

What's Ahead For Mortgage Rates This Week – January 6, 2014The last week of 2013 brought relatively good news in view of the economic roller coaster rides caused by legislative impasse. A brief shutdown of federal government agencies, and nail-biting suspense over if and when the FOMC of the Federal Reserve would taper its quantitative easing program.

Last week’s news was not high in volume due to the New Year holiday, but it does suggest that a general economic recovery is progressing and that housing markets are leading the “charge!”. Here are the details:

The NAR’s data of month-to-month reading of 0.20 percent showed an increase of 0.20 percent over October’s reading of -1.20 percent, which was the lowest reading for pending home sales in five months.

Lawrence Yun, chief economist for NAR, said that “…the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014.”

November’s year-over-year reading for pending home sales was 101.7 against a reading of 103.3 for November 2013. The good news is that November’s reading exceeded a 10-month low of 101.50 for October 2013.

Rapid Rises In Home Prices May Have Peaked

The S&P Case-Shiller 10 and 20- city home price indices for October was released Tuesday with positive results for both indices showing year-over-year gains in average home prices at 13.60 percent.

On an un-adjusted basis, the 10 and 20 city indices each gained 0.20 percent between September and October. The indices each showed a 1.00 percent gain in home prices on a seasonally adjusted annual basis. Case-Shiller cautioned that home prices are expected to rise at single-digit rates during 2014.

Consumer Confidence Rises, Housing And Manufacturing Sectors Improve

December’s consumer confidence reading gained 6.1 points for a reading of 78.1. This also exceeded the expected reading of 76.2.

The prior two months had shown decreased in readings thought to have been caused by the government shutdown in October. Consumers indicated that they are more confident about the economy than they have been in five and a half years.

Housing and manufacturing are leading the recovery, which reflects stronger housing, production and possibly manufacturing jobs, which have lagged behind increased production.

The national unemployment rate stood at 7.00 percent last week, which remains 0.50 percent above the Federal Reserve’s targeted rate of 6.50 percent.

Weekly jobless claims came in lower than expectations of 342,000 jobless claims at 339,000 new jobless claims. The prior week’s reading showed 341,000 new jobless claims.

Although a small decrease in new claims, last week’s reading further suggested that the economic recovery is on track.

Mortgage Rates

Thursday’s mortgage interest rate survey showed incremental increases in mortgage rates; concerns over continued tapering of the Fed’s QE program may have been a factor in the slight uptick in last week’s rates.

Average rates for mortgage loans rose as follows. The rate for a 30-year fixed rate mortgage increased from 4.48 to 4.53 percent with discount points rising from 0.70 percent to 0.80 percent.

The rate for a 15-year fixed rate mortgage was 3.55 percent with discount points unchanged at 0.70 percent. The rate for a 5/1 adjustable rate mortgage rose by five basis points to 3.05 percent with discount points unchanged at 0.40 percent.

Economists seem to agree on continued improvement in the economy for 2014, however rising mortgage rates and high unemployment remain as obstacles for faster economic recovery.

Face The Numbers, A Mortgage That Works For You

Face The Numbers, A Mortgage That Works For YouBefore taking out a mortgage to buy a home, it’s time to take a realistic survey of your finances so that you can determine your price range and what size of home you can comfortably afford.

Buying a home that suits your finances will mean that your mortgage payments will be easily within your budget and won’t cause you financial stress.

Stay In Your Price Range

Many people, when offered a large mortgage by the bank, are tempted to buy homes that are outside of their price range.

It’s easy to see why a larger property or a more luxurious home might be appealing, but by stretching too far beyond your means you are courting with disaster.

If your monthly mortgage rate just barely fits within your budget, without room for savings, retirement contributions, or to build up an emergency fund – it will only be a matter of time before things start to get tight.

What happens if you lose your job, or if your income decreases? If you are unable to meet your mortgage payments, it is easy to slip very quickly into debt or even bankruptcy. This is why it is so crucial to buy a home that fits your budget.

Here Are Some Questions To Ask Yourself For Figuring Out How Much Mortgage You Can Comfortably Afford:

  • Make a detailed budget that chronicles your monthly incomings and outgoings. How much money do you really have each month to work with?
  • What type of safety net do you have if something goes wrong, in terms of savings and family support?
  • How large of a down payment are you able to save up? At least 20% of the property cost is recommended, but more is always better.
  • How much outstanding debt do you have from your other lenders, such as your credit card debts, your bank loans, student loans, etc?
  • How stable is your income? Do you have a steady paycheck or are you self-employed with variable income?
  • Are you willing to change your lifestyle and lead a more frugal life to get the house you want? Is there anywhere you can cut expenses and spend more on your mortgage payment?
  • What will be the total of all of the costs associated with purchasing the home, including closing costs, inspections and other fees?
  • What are the costs associated with moving? Don’t forget to include the moving van, new appliances, hotel expenses, gas and meals out during the transition period.

Once you have asked yourself these questions and taken a close look at your budget, you will be able to determine realistically what you can afford when buying a home – so that you can find that dream home that meets your budget. For more helpful advice, contact your trusted mortgage professional.