Mortgage rates climb higher to 2.97%

The average mortgage rate for a 30-year fixed loan is now just 3 basis points away from 3%, after a 16 basis point jump last week pushed mortgage rates to 2.97%, according to Freddie Mac’s Primary Mortgage Market Survey.

The average mortgage rate hasn’t risen this high since the end of July 2020, but Sam Khater, Freddie Mac’s chief economist, noted higher rates signals an economy slowly regaining its footing.

“Though rates continue to rise, they remain near historic lows,” said Khater. “However, when combined with demand-fueled rising home prices and low inventory, these rising rates limit how competitive a potential homebuyer can be and how much house they are able to purchase.”

Rising rates didn’t slow new home sales in January though, after the U.S. censes bureau reported sales of new single-family houses in January were at a seasonally adjusted annual rate of 923,000 — 4.3% above December’s rate.

“However, recent increases in mortgage interest rates threaten to exacerbate existing affordability conditions. Builders are exercising discipline to ensure home prices do not outpace buyer budgets,” said National Association of Home Builders Chief Economist Robert Dietz.


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While purchase demand hasn’t shown any sign of decline, the refi wave is showing more vulnerability. As rates rose, refi activity fell 11% according to data from the Mortgage Bankers Association.

For many potential borrowers, the opportunity to refinance is lost before the chance even arises, while other prospective borrowers are caught in a clogged loan pipeline and don’t get the opportunity to lock in that low rate.

According to HousingWire’s lead analyst Logan Mohtashami, a one-eighth to a quarter turn in mortgage rates (high or low) can move the market substantially.

“There are people who had a 4.00% rate that refinanced to 3.25% and then said, ‘Oh well now that rates are low, I’ll refinance again to 2.75%.’ But if that rate sneaks up a quarter it’s no longer ideal and it’s lost its appeal. They are going to wait for it to come back down, right? And then it doesn’t,” Mohtashami said.

Source: housingwire.com

For the third week in a row, mortgage rates stay at 2.73%

For the third week in a row, the average mortgage rate for a 30-year fixed loan remained unchanged at 2.73%, according to Freddie Mac’s Primary Mortgage Market Survey.

Even though rates remained at their record low levels, mortgage applications dipped, with some economists pointing to overheated home prices and lack of supply for applications seesawing.

“The residential real estate market remains solid given healthy purchase demand while implied real-time home price growth is high, due to the inventory shortage that is plaguing the housing market,” Sam Khater, chief economist at Freddie Mac, said.

According to Joel Kan, Mortgage Bankers Association‘s vice president of economic and industry forecasting, despite some weekly volatility, Treasury rates have been driven higher by expectations of faster economic growth as the COVID-19 vaccine rollout continues.

“New COVID-19 cases are receding, which is encouraging and that has led to a rise in Treasury rates. But, the run-up in Treasury rates has not impacted mortgage rates yet, which have held firm,” Khater said.

A year ago at this time, the 30-year FRM averaged 3.47%, and the 15-year fixed-rate mortgage has also maintained a substantial low compared to last year, dropping to 2.19% last week.

With rates settling below 3% for six months now, homeowners are taking advantage of lowering mortgage rates – the MBA estimates refinances are still making up over 70% of mortgage activity. However, as economists warn that rates will make their way up, loan teams will need to buckle down for a drop in refi activity.

“It’s a tale of two economies. The services economy remains in the doldrums, but the production side of the economy remains strong,” Khater said.

Unemployment numbers for January painted a similar picture, as another month of rising COVID-19 cases left the U.S. unemployment situation virtually unchanged for the third month in a row.

Source: housingwire.com

Mortgage rates continue to stay low at 2.73%

The average mortgage rate for a 30-year fixed loan remained unchanged last week from the week prior at 2.73%, according to Freddie Mac’s Primary Mortgage Market Survey.

With mortgage rates hovering below 3% for over six months now, Sam Khater, Freddie Mac’s chief economist, said this may be a sign of an economy still struggling.

“This rate environment is advantageous for those who are looking to refinance in order to strengthen their financial position,” Khater said. “While many have already refinanced, the evidence suggests that upper-income homeowners have taken advantage of the opportunity more so than lower-income homeowners who could stand to benefit the most by lowering their monthly mortgage payment.”

Overall, record low mortgage rates are still fanning the refi flame regardless of who’s snagging the offer. The Mortgage Bankers Association reported that the refinance index of mortgage applications hit its highest level since March 2020 last week – a whopping 59% higher year-over-year.

And while borrowers are scrambling to snag what’s left of record low inventory, LOs came out on top. Recent data from mortgage software firm LBA Ware revealed that total funded loan volume by LOs in Q4 2020 increased 106% from the fourth quarter of 2019.


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The average LO managed to produce $2.6 million per month in volume in the last quarter, thanks to all those sweet low mortgage rates. That’s a 63% increase and a whopping million dollars more per person than seen in Q4 2019. 

But LBA Ware Founder and CEO Lori Brewer said loan teams should be cautious as signs the refi train slowing down are starting to show.

“As rates are predicted to rise in 2021 and for several years to come, loan teams that wish to maintain their earnings would do well to put a strategy in place that enables them to offset waning refi volume with more purchase volume,” Brewer said.

Source: housingwire.com

Understanding the seasonal patterns of mortgage rates

Much like the changing of the calendar, buying and selling homes follows a seasonality that that those in mortgage and real estate have grown accustomed to. But a recent study from tech startup Haus found that mortgage rates can also be seasonal, and borrowers can benefit from understanding that rhythm.

Analyzing over 8.5 million mortgage originations between 2012 and 2018 from Freddie Mac’s Single-Family Loan-Level dataset, Haus found that the sweet spot for rates is typically in January, when mortgage originations also typically slump.

Ralph McLaughlin, chief economist at Haus, explained the correlation. “So, what do lenders have to do to be competitive? They lower their rates. But let’s look at when Treasury rates were dropping like crazy early in 2020. What that usually means is that mortgage rates would also drop like crazy. But at first, mortgage rates didn’t drop. And it’s because there was such a flood of people looking to refinance that lenders couldn’t keep up.

“They couldn’t keep up with demand and so if they couldn’t keep up with demand that allows them to keep their prices relatively high,” McLaughlin said.

2020 was an outlier, with mortgage rates dropping to record lows on 16 different occasions. However, many economists expect as the economy begins its post-pandemic recovery, rates will also begin to stabilize to a more predictable pattern.

“We forecast rates to remain relatively low this year as the Federal Reserve keeps interest rates anchored near zero for a longer period of time, if needed until the economy rebounds,” said Sam Khater, Freddie Mac’s chief economist.

If rates stay low, the Haus study estimates that borrowers buying houses between $400,000 and $500,000 are going to reap the greatest reward – averaging a discount of 23 basis points compared to cheaper loans. That’s because it costs the same to originate a loan that is half a million dollars as it does $200,000, but the latter doesn’t involve as much return.

“You’re not making as much as you would on that more expensive mortgage, obviously, in order to cover some of those fixed costs, so lenders actually increase rates on the lower end of mortgage originations.” McLaughlin said.

An updated market outlook from Zillow expects seasonally adjusted home values to increase by 3.7% from December 2020 to March 2021, and by 10.5% through December 2021.

But even if lenders do inflate prices on a lower mortgage, borrowers can gain an advantage by playing the field. Across the largest lenders in the country (the 100 largest by volume of originations), Haus found on average a 75-basis point spread between the most expensive and least expensive lender. Taking into account size of down payment, existing debt and credit score, the study found that for the same borrower, a potential mortgage rate could, for example, average anywhere from 3.25% to 4%.

So how do lenders retain a potential borrower if they can’t match the price? McLaughlin said they are speculating that the convenience and experience borrowers play may be a leading factor. Those lenders who invest in digital technology and digital documentation are going to have the upper hand.

“It’s like, how much are you willing to pay for a hotel? I don’t think there’s a Ritz Carlton of mortgages or a Motel 6 of mortgages, but nonetheless there is variation and even if a rate is cheaper, a lot borrowers are thinking about quality,” McLaughlin said.

Surprisingly, a borrower who lowers their debt to income ratio doesn’t move the needle much on rates. According to the study, borrowers with a DTI below 36% (considered a “good” DTI), on average have mortgage rates that are just 3-6 basis points lower than borrowers with a DTI above 43% (considered “high”).

That said, recent changes implemented by the Consumer Finance Protection Bureau have removed DTI requirements from qualified mortgages. Haus estimates the ongoing impact that DTI will have on mortgage pricing is also likely to fall.

Source: housingwire.com

Mortgage rates hold steady at 2.77%

The average mortgage rate for a 30-year fixed loan fell two basis points last week to 2.77%, according to Freddie Mac’s Primary Mortgage Market Survey. Now 12 basis points above the record low set Jan. 7, rates more closely resemble those seen over two months ago.

The 15-year fixed mortgage rate also shifted downward to 2.21 from 2.23 the week prior.

With last week’s data in, mortgage rates have now managed to hover below 3% for nearly six months and have fueled purchase and refinance activity to record-setting levels amid a global health crisis.

But political and economic factors are causing some fluctuation in those rates, putting upward pressure on Treasury yields, said Sam Khater, Freddie Mac’s chief economist.

“However, we forecast rates to remain relatively low this year as the Federal Reserve keeps interest rates anchored near zero for a longer period of time, if needed until the economy rebounds,” Khater said.


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Freddie Mac’s quarterly forecast estimates that the average 30-year fixed-rate mortgage will be 2.9% in 2021 and 3.2% in 2022. However, some economists believe a slow upward path for rates is inevitable in 2021.

Despite the Fed’s vow to keep interest rates low until 2022, Mike Fratantoni, chief economist at the Mortgage Bankers Association, said recent Fed speeches revealed they are less committed to asset purchases, and wouldn’t be surprised if said purchases were reduced by the end of year.

“While for some time people thought that mortgage rates might be less impacted than Treasury rates, the spread between mortgage rates and Treasury rates has narrowed substantially. Going forward, any increases in Treasury rates are really going to be matched by increases in mortgage rates,” Fratantoni said.

The Treasury is now expected to auction close to $3 trillion worth of bonds this year, and with that amount of supply hitting the market, a historically inverse relationship will see bond prices dropping and yields on the rise.

Source: housingwire.com

Alongside rising yields, mortgage rates increase to 2.79%

The average mortgage rate for a 30-year fixed loan rose from its previous record low by 14 basis points this week to 2.79%, according to Freddie Mac’s Primary Mortgage Market Survey. This marks the first time mortgage rates have risen in almost two months.

The 15-year fixed rate also rose slightly this week from 2.16% to 2.23%.

Even with this week’s uptick, there have still been 23 consecutive weeks when average mortgage rates have been below 3%.

According to Sam Khater, Freddie Mac’s chief economist, rising treasury yields have been putting pressure on rates to finally move up again.

“While mortgage rates are expected to increase modestly in 2021, they will remain inarguably low, supporting homebuyer demand and leading to continued refinance activity,” Khater said. “Borrowers are smart to take advantage of these low rates now and will certainly benefit as a result.”

And take advantage they have.


Leveraging eClosings to effectively manage increased loan volumes

With no end in sight to record low mortgage rates and the increased loan volume, lenders must streamline workflows and accelerate time to close. Evolving from traditional closings to hybrid closings to full eClosings can help lenders process more loans at a faster pace without overwhelming their resources.

Presented by: SimpleNexus

Mortgage applications jumped 16.7% last week according to the Mortgage Bankers Association, and refi’s hit a massive 93% year-over-year mark as government loans experienced their strongest week in nearly eight years.

The jump underlines the seasonality behind the decrease in mortgage rates the week prior, coupled with expectations of additional fiscal stimulus from the incoming administration, according to MBA Associate Vice President of Economic and Industry Forecasting Joel Kan.

While purchase borrowers have been scrambling for months now to battle it out for the lowest possible rate on the limited inventory available, the Federal Reserve may have given borrowers until the end of 2021 to snap one up.

In a speech on Friday, Fed. Vice Chairman Richard Clarida said he expects the central bank to maintain the pace of its bond purchases through 2021. Those purchases are what prevented a credit crunch and made borrowing cheaper back in March.

Now, at an average of $120 billion a month — split between $80 billion in Treasuries and $40 billion in MBS — Fed holdings have surpassed $7 trillion, and Clarida doesn’t see a pullback anytime this year.

Source: housingwire.com