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Average mortgage rates were mostly up versus last week, according to rates data compiled by Bankrate. Rates for 30-year fixed, 5/1 ARMs, and jumbo loans moved higher, while 15-year fixed mortgage rates fell.
At the beginning of the year, many experts predicted multiple rate cuts in 2024, but that’s now changed. The movement of fixed mortgage rates parallels the 10-year Treasury yield, which moves as investor appetite fluctuates with the state of the economy, inflation and Federal Reserve decisions. At the close of the latest Fed meeting on May 1, policymakers held firm and opted not to cut rates.
“It is apparent the Fed has all but given up on multiple rate cuts in the near future,” says Ken Johnson of Florida State University. “This is not good for long-term mortgage rates. A hawkish Fed drives up the yield on 10-year Treasurys, which drives up mortgage rates.”
Whether mortgage rates move up or down, though, it’s difficult to time the market. Often, the decision to buy a home comes down to what you need. Depending on your situation, it might make sense to take a higher rate now and refinance later. This way you can start building equity, rather than hoping for a future of more favorable rates and home prices that might not materialize.
Rates as of May 6, 2024.
These rates are marketplace averages based on the assumptions here. Actual rates available within the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Monday, May 6th, 2024 at 7:30 a.m. ET.
The average rate you’ll pay for a 30-year fixed mortgage today is 7.34 percent, an increase of 2 basis points since the same time last week. Last month on the 6th, the average rate on a 30-year fixed mortgage was lower, at 7.02 percent.
At the current average rate, you’ll pay $688.29 per month in principal and interest for every $100,000 you borrow. Compared to last week, that’s $1.36 higher.
The average rate for a 15-year fixed mortgage is 6.74 percent, down 1 basis point over the last seven days.
Monthly payments on a 15-year fixed mortgage at that rate will cost $884 per $100,000 borrowed. Yes, that payment is much bigger than it would be on a 30-year mortgage, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more quickly.
The average rate on a 5/1 ARM is 6.74 percent, adding 4 basis points since the same time last week.
Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. To put it another way, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These loan types are best for people who expect to refinance or sell before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.74 percent would cost about $648 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.
The average rate for the benchmark jumbo mortgage is 7.41 percent, an increase of 4 basis points from a week ago. This time a month ago, the average rate for jumbo mortgages was lesser at 7.20 percent.
At today’s average rate, you’ll pay principal and interest of $693.06 for every $100,000 you borrow. That’s up $2.73 from what it would have been last week.
The average 30-year fixed-refinance rate is 7.34 percent, up 1 basis point since the same time last week. A month ago, the average rate on a 30-year fixed refinance was lower at 6.97 percent.
At the current average rate, you’ll pay $688.29 per month in principal and interest for every $100,000 you borrow. That’s an increase of $0.68 over what you would have paid last week.
If and when the Fed cuts interest rates depends on incoming economic data, such as the rate of inflation and the jobs market.
The rates on 30-year mortgages mostly follow the 10-year Treasury yield, which shifts with economic conditions, while the cost of variable-rate home loans more directly mirror the Fed’s moves.
“The Fed announcement [on May 1] of a slower run-off of Treasurys from its balance sheet should help keep a lid on mortgage rates and we may see brief declines,” says Greg McBride, CFA, Bankrate chief financial analyst. “But the focus will quickly shift back to inflation and until we start seeing better inflation numbers, the risk in mortgage rates remains to the upside.”
Broader economic factors, such as inflation and employment, affect the Fed’s decisions on rate changes, but your rate is also affected by your personal finances. Depending on your credit score, down payment, debts and income, you could be quoted a rate that’s higher or lower than the trend.
Mortgage rates adjust daily, but it appears that, for now, they will remain above the historical lows of recent years. If you’re shopping for a mortgage, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.
Keep in mind: You could save thousands over the life of your mortgage by getting at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.
“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).
The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.
Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.
Source: bankrate.com
All eyes will once again turn to the Federal Reserve this week as they meet to discuss the next steps with interest rates and economic policy. Specifically, will they raise rates above their current 23-year high? Or will they keep them steady following a series of disappointing inflation reports at the start of 2024? After all, rate cuts that seemed promising at the beginning of the year now seem off the table, possibly for the rest of the year.
And while the Fed doesn’t directly dictate rates for loans like mortgages, personal loans and other borrowing products, what they ultimately decide will greatly affect what rate lenders are willing to offer. Homebuyers will then follow this week’s meeting carefully. After coping with the highest mortgage rates since 2000, buyers are looking for relief — or signs of rate relief to come.
To that point, many are wondering if mortgage rates will rise after this week’s Fed meeting. That’s what we will break down below.
See what mortgage rate you could lock in before a potential increase here now.
While no one knows with certainty what will happen after the Fed meeting, set for April 30 and May 1, the chances of a rate cut are minimal. Thanks to sticky inflation and a target inflation rate goal of 2%, more work must be done (the current inflation rate is 3.5%). So rate cuts look out for this week. While a rate hike is possible, it’s also unlikely to happen until more data about the fight against inflation becomes available.
With those scenarios accounted for, then, it’s likely that the Fed will keep its benchmark interest rate unchanged at a range between 5.25% and 5.50%. But what will that mean for mortgage rates?
It won’t be particularly positive. While a rate pause is better than a rate hike, even a hint at an extended pause — or the potential for rate hikes in the months to come — could cause mortgage rates to rise in anticipation. So what Fed chairman Jerome Powell says this week will go a long way toward cooling rates — or making them rise further. However, if homebuyers were hoping for a rate cut, as some were predicting at the end of 2023, that’s not likely to happen, at least for now.
See what mortgage rate you could secure before the Fed announces its rate decision.
While the sub-3% mortgage rates of 2020 are unlikely to return anytime soon (or ever again), that doesn’t mean homebuyers still can’t get a lower mortgage rate now. It will just require a bit more work and strategic planning. Here are three ways buyers can get a lower mortgage rate now:
The strong potential for mortgage rates to rise again this week, even if the Fed keeps rates unchanged, could be a motivating factor for buyers to lock in a rate now. That said, there are still effective ways to get a below-average rate, ranging from buying mortgage points to adjustable-rate mortgages to simply shopping around for the best rates and terms. None of these strategies will bring back the record-low mortgage rates of recent years, but they are all worth carefully considering until the Fed finally starts cutting rates again.
Source: cbsnews.com
Have you ever wondered, “Should I move to Reno, NV?” Known as “The Biggest Little City in the World,” Reno is famous for its vibrant nightlife, world-class entertainment, and thriving arts and culture scene. Residents enjoy easy access to Lake Tahoe, as well as a wide range of outdoor activities like hiking, skiing and water sports. From the neon lights of its famous casinos to the serene parks and rivers that crisscross the city, Reno offers a unique mix of excitement and tranquility that’s hard to find anywhere else. In this article, we’ll breakdown the pros and cons of living in Reno to help you decide if it’s the right place for you. Let’s go.
Walk Score: 40 | Bike Score: 52 | Transit Score: 24
Median Sale Price: $550,000 | Average Rent for 1-Bedroom Apartment: $1,400
Reno neighborhoods | Houses for rent in Reno | Apartments for rent in Reno | Homes for sale in Reno
Reno is often overshadowed by its glitzy neighbor Las Vegas. However, this city boasts a surprisingly vibrant arts and culture scene of its own. The annual Burning Man festival, while held in the Black Rock Desert, leaves a lasting impact on Reno’s local culture, with numerous art installations and events throughout the year. The city is also home to the Nevada Museum of Art. This museum showcases a wide range of exhibitions and is the only accredited art museum in the state. Additionally, the Midtown District is bursting with murals, galleries, and boutiques, making Reno a hidden gem for art lovers.
Reno faces significant air quality issues, particularly during the summer months. This is when wildfires in the region can cause smoke and particulate matter to blanket the city. This not only obscures the beautiful views of the surrounding Sierra Nevada mountains, but can also pose health risks to some residents. The city’s location in a valley further exacerbates these issues. Pollutants can become trapped, leading to days or even weeks of poor air quality.
One of Reno’s most appealing aspects is its proximity to a plethora of outdoor recreational activities. Located just a short drive from Lake Tahoe, residents and visitors can enjoy world-class skiing, snowboarding, hiking, and water sports within a 45-minute drive from the city. The Truckee River, which runs through the heart of Reno, offers kayaking, fishing, and even a whitewater park for enthusiasts. This easy access to diverse landscapes makes Reno an ideal location for outdoor adventurers.
Reno’s public transportation system struggles because of its limited routes and infrequent schedules, particularly in the evenings and on weekends. With a Transit Score of 24, it can be difficult for those without personal vehicles to navigate the city efficiently. The reliance on cars contributes to traffic congestion and environmental concerns, highlighting a need for improved and more sustainable transportation options.
Reno’s culinary scene has been experiencing a renaissance. Recently, there’s been an influx of new restaurants, bars, and cafes opening their doors to the public. From food trucks offering gourmet options to high-end dining experiences featuring locally sourced ingredients, Reno has begun to establish itself as a foodie destination. The city also hosts several food festivals throughout the year. These events celebrate everything from craft beer to international cuisine, further cementing the city’s status as a culinary hotspot.
With Reno’s rising popularity and influx of new residents, the housing market has become increasingly competitive and expensive. Home sale prices are about $100,000 more than the national average and rents have risen sharply. This lack of affordability can make it challenging for some homebuyers to find affordable housing options within the city, contributing to a growing concern over the cost of living in Reno.
Reno is home to a major public research university, the University of Nevada, Reno (UNR). The university offers a wide range of undergraduate, graduate, and doctoral programs. UNR is particularly renowned for its research and education in environmental science, engineering, and journalism. The presence of the university contributes to the city’s community and provides numerous educational opportunities for residents looking to advance their careers or pursue higher education.
Reno experiences a high desert climate, which means residents must prepare for hot summers and cold winters. The temperature can soar above 100°F during the summer months. Making outdoor activities uncomfortable or even dangerous without proper precautions. Conversely, winters can be harsh. Temperatures often drop well below freezing and there’s occasional heavy snowfall, particularly in areas closer to the Sierra Nevada mountains. These seasonal extremes can be a drawback for those not accustomed to such variability in weather.
The sense of community in Reno is strong, with local soften coming together to support local businesses, arts, and charitable causes. The city hosts numerous community events throughout the year, including farmers markets, art walks, and cultural festivals, which foster a sense of belonging and civic pride. This community spirit is a testament to Reno’s resilience and the warm, welcoming nature of its people, making it a great place to call home.
Reno, situated in the high desert, faces challenges related to water scarcity. The region’s limited water resources are under pressure from population growth and prolonged drought conditions, which can affect water quality and availability. Efforts to manage and conserve water are critical, but the ongoing concerns about sustainability and the impact of climate change make water scarcity a significant issue for Reno’s future.
One of the financial advantages of living in Reno is Nevada’s favorable tax structure. The state does not impose an income tax, which can result in significant savings for residents, especially when compared to neighboring states with higher tax rates. Additionally, Nevada’s overall tax burden is relatively low, including property taxes, making Reno an attractive option for both individuals and businesses looking for a tax-friendly environment.
Source: rent.com
The average for a 30-year fixed-mortgage is 7.34% today, up 0.02% over the last week. The average rate for a 15-year fixed mortgage is 6.74%, which is a decrease of -0.02% from the same time last week. For a look at mortgage rate movement, see the chart below.
Because inflation data hasn’t been improving, the Federal Reserve has been pushing off rate cuts. Though mortgage rates could still inch down later in the year, housing market predictions change regularly in response to economic data, geopolitical events and more.
Mortgage rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Each mortgage has a loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. With a fixed-rate mortgage, the interest rate is set for the duration of the loan, offering stability. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market. Fixed-rate mortgages are a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.
The 30-year fixed-mortgage rate average is 7.34% today. A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.
Today, the average rate for a 15-year, fixed mortgage is 6.74%. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.
A 5/1 adjustable-rate mortgage has an average rate of 6.74% today. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.
Over the last few years, high inflation and the Federal Reserve’s aggressive interest rate hikes pushed up mortgage rates from their record lows around the pandemic. Since last summer, the Fed has consistently kept the federal funds rate at 5.25% to 5.5%. Though the central bank doesn’t directly set the rates for mortgages, a high federal funds rate makes borrowing more expensive, including for home loans.
Mortgage rates change daily, but average rates have been moving between 6.5% and 7.5% since late last fall. Today’s homebuyers have less room in their budget to afford the cost of a home due to elevated mortgage rates and steep home prices. Limited housing inventory and low wage growth are also contributing to the affordability crisis and keeping mortgage demand down.
Most housing market experts predict rates will end the year between 6% and 6.5%. Ultimately, a more affordable mortgage market will depend on how quickly the Fed begins cutting interest rates. The central bank could start lowering interest rates in the fall, but it will depend on how the economy fares in the coming months.
Mortgage rates fluctuate for many reasons: supply, demand, inflation, monetary policy, jobs data and market expectations. Homebuyers won’t see lower rates overnight, and it’s unlikely there will ever be a return to the 2-3% mortgage rates we saw between 2000 and early 2022.
“We are expecting mortgage rates to fall to around 6.5% by the end of this year, but there’s still a lot of volatility I think we might see,” said Daryl Fairweather, chief economist at Redfin.
Every month brings a new set of inflation and labor data that can influence the direction of mortgage rates, said Odeta Kushi, deputy chief economist at First American Financial Corporation. “Ongoing inflation deceleration, a slowing economy and even geopolitical uncertainty can contribute to lower mortgage rates. On the other hand, data that signals upside risk to inflation may result in higher rates,” Kushi said.
Here’s a look at where some major housing authorities expect average mortgage rates to land.
Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.
Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.
Source: cnet.com
Still, mortgage professionals on the ground continue to note an elevated pace of application and homebuying activity with borrowers seemingly accustomed to the high-rate environment of recent times. Mortgage rates in the US have risen for the fourth consecutive week, reaching an average of 7.17% for 30-year fixed loans.https://t.co/7m4K777J6b — Mortgage Professional America Magazine (@MPAMagazineUS) … [Read more…]
Higher interest rates are increasing pressure on homebuyers who are already facing a challenging housing market. Many would-be buyers are understandably putting purchasing plans on hold, but there are no signs mortgage rates will drop significantly in the near future, and there are some sensible steps to take if you want to become a homeowner soon.
Mortgage rates surged past 7% for the first time this year on April 18 and continued to climb last week. According to Freddie Mac’s benchmark survey, the rate on a 30-year, fixed-rate loan is averaging 7.17% — more than half a percentage point higher than at the start of the year. And the upward trend may not be over.
Len Kiefer, Freddie Mac’s deputy chief economist, says it’s hard to predict just how much higher rates could rise, given the volatility in the market. A lot depends on data regarding inflation, which is proving to be stickier than everyone hoped for, and market expectations as to when the Federal Reserve will start cutting short-term interest rates.
“Given the current [economic] trajectory we’re on, it’s looking like there’s still some upward momentum,” Kiefer says. “In the very near term, we’ll probably see these rates be at the current level or a little bit higher.”
Most early-year forecasts predicted that mortgage rates would start moving in a slow downward trend throughout the year. While those outlooks seemed to be on the money during the first two months of the year, the opposite has been true in recent months.
According to Bob Smith, head of real estate for Advisor Credit Exchange, for at least the remainder of the year, “Rates are going to be bounded in a range . . . probably in the 6%s, low 7%s.”
It’s unclear when inflation will finally be under control, meaning mortgage rates will probably remain volatile for a while before settling down.
In the long term, Kiefer and Smith see inflationary pressures easing later this year. That should help nudge mortgage rates lower — just “not as much as we had thought,” Kiefer says.
High mortgage rates are hitting buyers right in the middle of the spring buying season. According to Freddie Mac, about 36% of all home sales take place between March and June, making these months the busiest time in the housing market.
Elevated mortgage rates, combined with high home prices and a lack of enough inventory to meet buyer demand, have led to record-high monthly payments. Homeowners insurance costs are at all-time highs as well, up 20% in the past year. These factors are pushing many would-be buyers to put their plans on hold. According to a report by BMO Financial Group, 71% of would-be homebuyers are waiting for rates to drop before buying a house.
Potential home sellers are also feeling the crunch, especially those who bought when rates were much lower. The cost of obtaining a new mortgage at a higher rate is keeping owners locked into their homes.
Despite the challenges, buyers shouldn’t panic. “Rates are, for a large part, temporary. At some point, [they] will go down,” says Scott Bridges, chief CDL production officer at lender Pennymac.
Instead of worrying about things that are out of your control, it’s best to focus on the fundamentals of homebuying to see if purchasing a home right now is the right move (regardless of the rate). Here’s what you can do:
Check your credit score and try to improve it while you’re shopping for a home. Buyers with better credit generally have access to lower mortgage rates. On the other hand, taking on extra debt during this time will reduce your score as well as your debt-to-income ratio, which will cause lenders to offer a higher interest rate on a mortgage. “When rates are higher, every bit of debt counts,” says Bridges.
Higher mortgage rates could move some buyers out of the market, which means more opportunities and less competition for those who can afford to buy. Don’t be afraid to lowball a little bit. With fewer buyers, you may be able to negotiate a lower price or concessions with a motivated seller.
Ideally, you’ll find a move-in ready home that fits your budget. The reality is that homes requiring little to no work attract a lot of attention and you may find yourself in a bidding war. Don’t be afraid to look for homes that may need some TLC. The asking price is likely more negotiable, and you may find you can use the money you save to fix up the home to your taste.
Set a budget you’re comfortable with. Use a housing affordability calculator to get an estimate of how much you can pay towards a home purchase. You can also get loan estimates from several different lenders to find the best rates and loan terms. And remember, the maximum amount a lender is willing to lend isn’t necessarily what you should spend on a home. Set a lower budget if it makes better financial sense or if you want to have some wiggle room if you have to compete against other buyers.
A house is likely the most amount of money you’ll ever spend. Bridges says that homebuyers typically make mistakes when they rush the process. Take the time to inspect the property and ask to see a home appraisal. Make sure it’s the right fit for your needs at the right price for you.
“Try to do things patiently,” says Bridges. “Don’t overpay, and don’t panic.”
8 Best Mortgage Lenders of May 2024
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Source: money.com
Housing experts say mortgage rates are likely to hover in the 7 percent range in May, amid elevated inflation that is keeping the Federal Reserve from reducing borrowing costs.
The high cost of home loans may keep buyers at bay as they await the decline of rates before they can make the leap toward homeownership.
Read more: Find the Lowest Rates From Top Mortgage Lenders
The Federal Reserve raised interest rates starting in March 2022 to its current two-decade high of 5.25 to 5.5 percent, a move geared to fight soaring inflation. This contributed to the push-up of borrowing costs, including for home loans. Inflation is still struggling to cool down to the 2 percent central bank target, which has forced policymakers to retain the high interest rate environment.
The 30-year fixed rate, for the week ending April 19, rose for the third week in a row to 7.24 percent—the highest level since November 2023.
Economic data, particularly around inflation, have come in higher than expected over the last few weeks. In March, inflation jumped to 3.5 percent on a yearly basis, up from 3.2 percent the prior month.
Unless inflation surprises in the coming weeks, mortgage rates are likely to stay in the 7 to 7.5 percent range, according to Realtor.com’s chief economist Danielle Hale. Fed policymakers are set to conclude their latest meeting on May 1, and they are unlikely to change their current stance on rates.
“Of all the data, I think that the inflation, specifically the [Consumer Price Index] out May 15, will have the biggest impact,” Hale told Newsweek. “Inflation and labor market data has come in higher and hotter than expected. This change in the data, which is driving a change in the outlook, has pushed interest rates, including mortgage rates, higher across the board.”
Read more: How to Get a Mortgage
High mortgage rates will depress buyers’ ability to buy homes.
“I expect homebuyers to approach the housing market more tepidly, and sales will reflect that trend,” Hale told Newsweek.
Orphe Divounguy, a senior economist at Zillow Home Loans, echoed Hale’s perspective on what will drive mortgage rates as inflation remains elevated.
“The fact that government borrowing remains high relative to demand for U.S. Treasury bonds is likely to continue to push yields—which mortgage rates follow—elevated,” he told Newsweek. “Looking into May, we can expect more rate volatility as investors and the Fed wait for more conclusive evidence of a return to low, stable and more predictable inflation.”
Buyers are still likely to be waiting for rates to fall but the key to the trajectory of rates will be how inflation performs over the coming months, said Holden Lewis, a home and mortgage expert at NerdWallet.
“Inflation remains stubbornly above the Fed’s target of 2 [percent], and mortgage rates won’t fall significantly until the inflation rate consistently drops for multiple months in a row,” Lewis told Newsweek. “Potential home buyers are holding back and waiting for mortgage rates to decline. The slowdown in home sales will allow the inventory of unsold homes to increase. That won’t stop home prices from going up, but it might slow down the pace of home price increases this summer.”
In May, policymakers from the Fed will reveal their latest rate decision and provide insights on the trajectory of borrowing costs. Also in May, the CPI inflation data reading for April will give insight into how prices are performing, which will give a signal to how rates might unfold over the next few weeks.
For the housing market, one silver lining may come from buyers who have to acquire homes due to personal situations.
Read more: How to Buy a House if You Have Bad Credit
“Purchases are likely to be dominated by movers who feel like they don’t have a choice to wait out higher rates, but rather, they have to move now for personal reasons,” Hale said.
Zillow’s Divounguy suggested that with mortgage rates expected to stay high, lower-priced homes could see escalated competition.
“We continue to expect significant competition this spring, especially for attractive listings on the lower end of the price range. New construction homes are selling well too; they’re available, and builders are offering financial incentives—such as rate buydowns and covering closing costs—to potential home buyers,” he said. “Remember, higher rates mean the home price a buyer can afford is lower, so if you’re shopping for a home in the mid-tier or lower, it’s best to assume you’ll run into some competition.”
Hale suggested that sellers, who can also be buyers, enter the housing market.
“With 80 [percent] of potential sellers having thought about selling for 1 to 3 years, it could be that higher rates are less of a deterrent this year than in the recent past,” she said.
The perspective from lenders appears to be that the 10-year treasury yields, currently at around 4.7 percent, will drop in the coming weeks to 4 percent and narrow the difference between mortgage rates and treasury rates.
“We expect the spread will tighten further by the end of 2024. The combination implies a 30-year fixed mortgage rate mostly unchanged in the coming weeks but eventually moving closer to 6.5 percent by the end of 2024,” Joel Kan, Mortgage Bankers Association’s deputy chief economist, told Newsweek.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
Our writers and editors used an in-house natural language generation platform to assist with portions of this article, allowing them to focus on adding information that is uniquely helpful. The article was reviewed, fact-checked and edited by our editorial staff prior to publication.
Buying a home doesn’t necessarily require a large down payment. The conventional wisdom is that you need 20 percent down, but in reality, you don’t have to save that much. In fact, there are no-down payment mortgage options. Here’s what you need to know about these types of loans.
A no-down payment mortgage is a home loan that allows you to finance 100 percent of the home’s purchase price without having to put any money down at closing. Zero-down mortgages can be particularly beneficial for those buying a home for the first time or with limited savings.
The easiest way to avoid a down payment is to qualify for one of the two no-down payment mortgage programs backed by the government: a USDA or a VA loan.
The U.S. Department of Agriculture (USDA) backs USDA home loans, a mortgage guarantee program for those buying a home in designated rural areas. There are many areas you might not consider “rural” that do qualify under USDA guidelines, so be sure to check your eligibility on the USDA website. USDA loans don’t require a down payment, but borrowers must meet credit and income requirements to qualify.
Although there’s no down payment with a USDA loan, there is an upfront guarantee fee of 1 percent of the principal loan amount, as well as an annual fee of 0.35 percent, which borrowers can roll into the cost of the mortgage. While you won’t pay any money initially if you choose to roll these fees into the loan, keep in mind that it adds to the total balance and will accrue interest over the loan term, which means you’ll pay more overall.
If you’re a military service member, veteran or surviving spouse, you could be eligible for a VA loan guaranteed by the U.S. Department of Veterans Affairs (VA) with no money down. There is no mortgage insurance requirement with this loan. However, like a USDA loan, you do have to pay an upfront funding fee, which can be rolled into the mortgage. The funding fee ranges from 1.25 percent to 3.3 percent of the loan amount. You can reduce the funding fee by making a down payment.
Another perk: VA loan lenders often offer more competitive rates for these products, which helps you save money over the life of the loan.
Compare: Current VA loan rates
In addition to government-backed loans, you might be able to explore:
If you don’t qualify for one of the no-money-down home loan options, you might still be able to buy a home with the next best thing: a low-down payment mortgage.
Insured by the Federal Housing Administration (FHA), an FHA loan requires only 3.5 percent down with a credit score as low as 580. (If you have a credit score between 500 and 579, you might be able to qualify with a higher down payment of 10 percent.) It’s a popular option for homebuyers with less-than-perfect credit and not a lot of savings. Like other government-insured programs, FHA loans are offered by private mortgage lenders, so you might also have to meet a lender’s criteria to qualify. Additionally, you’ll have to pay for FHA mortgage insurance, which adds to your monthly payment and the cost of the loan. You’ll pay these premiums for as long as you have the mortgage, in most cases.
Compare: Current FHA loan rates
Available through many mortgage lenders, the HomeReady program is a conventional loan backed by Fannie Mae. The down payment requirement on a HomeReady loan is just 3 percent. While you’ll have to pay mortgage insurance to compensate for the low down payment, it’s often at a lower price tag compared to other conventional loans.
Backed by Freddie Mac, Home Possible is a similar mortgage program to HomeReady, with a 3 percent down payment and mortgage insurance requirements.
Freddie Mac also offers a 3 percent down mortgage option for first-time homebuyers who qualify through its HomeOne program. The main difference between this loan program and Freddie’s Home Possible mortgage is that a HomeOne mortgage does not impose income limits.
Some lenders are now offering mortgage programs for borrowers who qualify that only require a 1 percent down payment. Some examples include Rocket Mortgage’s ONE+ program and United Wholesale Mortgage’s Conventional 1% Down program. For these programs, the lender pays 2 percent of the required 3 percent down payment for a HomeReady or Home Possible loan — or up to a maximum contribution that varies by lender and loan size — and you only need to provide the remaining 1 percent.
A Conventional 97 mortgage is another Fannie and Freddie program that only requires a 3 percent down payment. You might pay more for private mortgage insurance (PMI) with this type of loan, but your payment depends on your financial profile. You can also request to cancel PMI when you reach 20 percent equity in your home.
The Good Neighbor Next Door (GNND) program is for borrowers who work in select public service professions — teachers, firefighters, law enforcement and emergency medical technicians — and are planning to buy a home in a qualifying area.
The program, sponsored by the U.S. Department of Housing and Urban Development (HUD), provides a discount of up to 50 percent on a home with a down payment of just $100. The borrower must qualify for a first mortgage, and the discounted portion of the home comes in the form of another loan. If the borrower continues to meet program requirements, the second mortgage won’t have to be repaid.
The ability to buy a home with no or very little money down can be appealing, but there are drawbacks, too.
Deciding whether to go for a no-down payment mortgage depends largely on your financial circumstances and goals. Here are a couple of scenarios when a zero-down mortgage might be a good idea:
The Department of Veteran Affairs and the U.S. Department of Agriculture DA don’t set a minimum credit score requirement for, respectively, their no-money-down VA and USDA loans. However, most lenders offering these loans do, and they’d want them to be at least in the “fair” range: 620 for VA loans, 640 for USDA loans. Because you’re not bringing any cash to the table, and financing virtually all of your mortgage, the lender has to be extra-reassured that you pay your debts fully and on time.
Source: bankrate.com
While mortgage rates remain higher than they were during the housing market’s booming pandemic years, Moody’s Ratings has predicted them to finally start declining over the next few years in a new report.
Exactly a week ago, the Federal Home Loan Mortgage Corporation, better known as Freddie Mac, reported that the average rate for a 30-year-fixed mortgage—the most popular among U.S. borrowers—had reached 7.1 percent, a record high for this year so far.
Read more: How to Find the Right Mortgage for You
Moody’s Ratings’ experts believe mortgage rates will come down—just not as quickly as homebuyers might wish for. The financial research company is currently estimating that mortgage rates will remain higher “than the extremely low levels during the decade of aggressive central bank stimulus that preceded the past two years” in the coming months, but will likely reach around 6 percent or somewhat less by the end of 2025.
This is good news for aspiring homebuyers who have been squeezed out of the market by skyrocketing home prices and high mortgage rates, which climbed as a direct consequence of the Federal Reserve’s aggressive rate-hiking campaign to combat the rise of inflation last year.
While most analysts expect the central bank to lower interest rates this year, the Federal Reserve has so far failed to do so, as the latest data on the cost of living show that inflation remains higher than expected at 3.48 percent in March. The Federal Reserve does not directly set mortgage rates, but any rise in interest rates impacts new mortgage lending.
Read more: Compare Low Rates With the Best Mortgage Lenders
Higher mortgage rates led to a drop in demand in late summer 2022 due to the unaffordability of buying a home for many Americans; but the price correction that followed this slide in demand was rather modest. In spring 2023, prices started climbing back up across the country, as the supply of homes remained low.
While the historic shortage of homes in the U.S. can primarily be traced back to the fact that the country has under-built following the bursting of the housing bubble and the financial crisis of 2007-2008, high mortgage rates have also caused many homeowners to hold on to their homes instead of putting them on the market.
“Many U.S. homeowners have low fixed-rate mortgages that they are reticent to give up, which is constraining existing property listings and sales,” Moody’s wrote in the report.
Faced with a growing demand for new constructions and mortgage interest rate buydowns, the company’s experts expect home prices to avoid significant decline in the coming months, sliding by a moderate 5 percent this year after falling 6.6 percent in 2023.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
The bottom line is the housing market remains in flux and is once again adjusting to the likelihood of interest rates remaining higher for longer after being teased by the potential of a falling rate environment.
This flux has created far more volatility in the housing market, particularly in recent weeks, with the MOVE Index — a measure of rate volatility in the U.S. Treasury market — jumping to as high as 121 in mid-April after ending March near 85.
Ben Hunsaker, a Beach Point Capital Management portfolio manager who is focused on securitized credit, said that during the past year, nonqualified mortgage (non-QM) AAA bond spreads have actually contracted from 155 to 135, while agency mortgage-backed securities (MBS) spreads have widened from about 118 to 134 over the same period.
“With agency spreads moving out 10 to 15 basis points, you would expect that non-QM spreads also have to widen eventually, otherwise the market’s a little bit out of sync,” Hunsaker said. “On a forward-looking basis, you would expect you don’t have the same tailwinds as you did before.”
Volatility in the Treasury market, which trades at a shifting spread below that of mortgage rates, also translates into uncertainty among housing market investors. Market observers say this normally leads to investor hesitancy and a tendency to keep more money parked on the sidelines.
“When interest rate volatility goes up, you generally have lower fund flows, which you’ve seen over the last few weeks,” Hunsaker said.
On top of that, mortgage origination volumes are projected to be flat this year in the agency (Fannie Mae, Freddie Mac and Ginnie Mae) sector, and only slightly better on the non-agency (non-QM) side compared to 2023, according to market experts.
Non-QM mortgages include loans that cannot be purchased by Fannie Mae or Freddie Mac. The pool of non-QM borrowers includes real estate investors, fix-and-flippers, foreign nationals, business owners, gig economy workers and the self-employed.
What does this market uncertainty — marked by low origination volumes and a move toward higher rates for longer — mean for the secondary mortgage market, which creates liquidity for the primary mortgage market via securitization and has a heavy finger on the scale in determining interest rates for homebuyers?
If bond yields rise in the secondary market due to a supply-demand imbalance or because of increased perceived risk, then that also tends to put upward pressure on mortgage rates in the primary market.
HousingWire interviewed a range of experts across the secondary market to get a pulse on the dynamics at play at the end of April across the following sectors: whole loan trading, agency and non-agency MBS, and mortgage servicing rights (MSRs).
Following are excerpts from their responses that reflect on the good, the bad and the ugly of the current market.
“When we came into the year, we thought we were in for as many as five or six rate cuts. That was a problem for sellers of loans. For mortgages, specifically 30-year fixed rate, it was hard to find a buyer willing to make a strong premium payment [on a whole loan purchase] when you think you are going to get four or five or six rate cuts, because that meant rates were going to fall and [mortgage] prepayments [due to refinancing] were going to increase.
“However, what we’re discovering is that those folks that had the courage to put that trade on back in the third and fourth quarter of last year are in the first quarter of this year being rewarded. Because if we are now looking at only one rate cut [in 2024], maybe even one hike — although I think that’s still a pretty low probability — but let’s just say we’re flat — then prepayment speeds should remain low.
“Higher-coupon loans now may [offer] a higher rate of return for longer than someone might have anticipated in a rate assessment that was at the beginning of 2024. … So, basically, if I’m trading [as a seller] a 7% loan right now, I may get a premium — like a solid 102 [over par] or whatever.
“The buyer is going to be happy because the prepayment speeds are likely to remain low given the current Fed stance [of higher for longer], and you can amortize that premium over a longer period of time to get a better yield. So, both seller and buyer are happier with the newer loan.“
— John Toohig, head of whole loan trading at Raymond James and president of Raymond James Mortgage Co.
“There’s a lot of cash on the sidelines. There’s a lot of money out there. This translates into whole loans too.
“In RPL and NPL, which are reperforming loans and nonperforming loans, there’s a ton of demand. We just put a bid out recently and … had over 30 bids. That tells you that folks are trying to grab those loans, either for the real estate — if it’s a nonperforming loan … such as for rentals, accumulating assets for their portfolio — or if it’s reperforming, to get cash flows at a discount.
“Those loans [RPL and NPL] are really rich on the demand side, but the only sellers are those who are forced to sell because it’s at a discount, with the stuff we’ve seen trading in the 80s [below par].
— JB Long, president of Incenter Capital Advisors
“Rate volatility has persisted in the market. It’s essentially like playing a game of Keno [with bets being placed on] what number when, and that money can be lost doing so is not surprising. From my perspective, transaction volume and mortgage origination volume has been on its back — and stayed on its back — for the last year and a half.
“ … There is a book called “Who Moved My Cheese.” And it is a very simple book that highlights a very important premise. A mouse goes looking around, looking around, looking around, and spends all its time looking for cheese. Then [after it finds the cheese], it just keeps going back to the same place, but the cheese is gone.
“The mouse forgot the whole reason he ever found the cheese in the first place, and that’s because the mouse remained nimble and adaptive, as opposed to just hitting the same button as many times as he possibly could. The point is we have to continue to evolve with an evolving market.
“ … [For example], one of the big changes in the [agency] CRT [credit risk transfer] market has been a decision by the GSEs to not issue the most subordinate [securities] tranches. They are the riskiest tranches … and they’re the ones that offer the highest return. The supply of that profile has diminished considerably because they’re not issuing it anymore.
“… So, what happens is those investors go to non-QM subs. … There’s a lot of demand for that sub now [securities backed by non-QM mortgages, particularly those linked to home equity loan products].“
— Peter Van Gelderen, specialist portfolio manager in the fixed-income group and co-head of Global Securitized at TCW
“Inflation is running hotter than expected, but I wouldn’t say it’s out of control. We’ve just been kind of consistently in a range that’s higher than what the Fed would like. .. Rates do feel rich. They do feel high, but I think the market has adjusted pretty well to where the rates are and certainly it’s within the range of expectations.
“The credit spreads [for non-agency MBS] have come in throughout the year, and so the [non-agency] securitization market is open, and it’s functioning from the originator through the aggregator to the end buyer. Everyone can still make it work.
“It’s by no means the best market anyone’s ever seen, but [non-agency mortgage] originations are growing. … It’s a market that’s diverse in product types and participants.“
— Dane Smith, senior managing director and president of Verus Mortgage Capital
[Editor’s Note: Kroll Bond Rating Agency (KBRA) expects 2024 issuance for non-agency MBS to be approximately $67 billion, up 22% year over year. Home equity lines of credit (HELOCs) and closed-end second (CES) originations are expected to account for $11 billion of the increase. KBRA’s measure of non-agency loans encompasses the prime jumbo, nonprime/non-QM, and home equity lending spaces, as well as credit-risk transfer deals.]
“The lock-in effect [of homeowners staying in place due to low mortgage rates] has taken so many homes off the market that you’re seeing reduced sales volume, which creates fewer issuances of mortgages so that the market doesn’t have to metabolize that many loans.
“… But you still have this issue that the Fed displaced real money investors [in the agency MBS acquisition market] for a whole business cycle, a decade, [before pulling back from the market starting in 2022] and that market just doesn’t reappear overnight.
“… We’ve never had this many people that have a loan that’s so far below prevailing rates. So, we’re in a part of the cycle that people can’t look to a model and say, ’This is what’s going to happen,’ because we’ve never been here before.
“… Lower interest rates will create more [agency MBS] issuance, but more issuance creates a wider basis [spread from Treasurys] because there’s now a lack of investor demand versus the added MBS supply, and this creates higher primary mortgage rates to account for the lower investor bids for the excess MBS supply.
“… It’s a structural issue that I would love to see more focus on … because if you don’t have a couple of trillion dollars of excess balance sheet out there somewhere that’s priced appropriately, then the homeowner is going to end up paying more for their mortgage than they otherwise would.“
— Sean Dobson, chairman and CEO of real estate investment firm Amherst
“I think agency spreads have a pretty high correlation to interest rate volatility, so when you go from relatively low interest rate volatility, like where we came into April, to where we are today, it’s a pretty big shock to the agency mortgage market.
“And accordingly, you’ve seen agency spreads widen pretty materially. [April has] been a really bad month for agency mortgage-backed securities. … The supply-demand for agency MBS is probably in balance, however, and it’s in balance because there’s very light creation of new agency MBS [about $232 billion of agency MBS issuance in Q1 2024, compared with $223 billion in Q1 2023, according to the Securities Industry and Financial Markets Association (SIFMA)].
“… The money managers who really drove spreads tightening [in the agency market] from middle of last year to the end of last year, they’ve become pretty overweight in agency MBS. … But there’s still a lot of annuity money being deployed from annuity sales, and so that should be a continued tailwind [for the overall secondary mortgage market].
“Insurance is really the 900-pound gorilla in the room driving the bus, so they matter a lot, and there’s not a lot of credit creation that can satiate their needs.“
— Ben Hunsaker, portfolio manager focused on securitized credit for Beach Point Capital Management
“You were able to get [MSR] trades off [much of] last year with interest rates somewhat certain. But then when the uncertainty hit [late in the year, with rates declining] that slowed the fourth-quarter [deal volume], and that’s what was reflected [in the number of deals closing] when we came into this first quarter.
“Then all this data starts coming out and it became obvious that [rate cuts were] not going to happen, and that gave a lot more confidence to the buy side. [MSRs tend to price better in a high or rising rate environment because prepayment speeds are reduced. They tend to lose value in a falling rate environment as mortgage prepayments increase, reducing the payout of MSRs.]
“So, look, pricing began to pick up [as it became clear rate cuts were not likely in the near term], but we also saw an interesting phenomenon. And that is the capital that was tied to highly efficient, highly capable [refinance- and home equity loan-focused] recapture platforms decided it was not as concerned about interest rates [going] either way.
“If rates do not move, [they are] comfortable with the pricing that they’re paying today based on just the steady prepayment speeds and the cash flows, and they’re clipping coupons each month based off of those payments coming in. However, when rates do move, they are going to be in position to recapture [those customers via refinancing].
“… So, we now have a strong appetite for the MSR asset, whether it’s out of the money — which to us is below prevailing market rates — or at the money, and we also have a strong demand for both conventional as well as government [MSR assets].
“I will paraphrase a seasoned veteran in the industry that I was talking to recently, who said candidly, ’I have never seen the market like it is today — how extremely active and busy it is.’
“I’m not calling a peak yet. There’s a lot of interest from some pretty significant [investor] sources, who have a lot of capital [and] who are still looking to buy … And it’s driven again by [a desire to] put units on their platform, maintaining efficiencies, while also then having the ability to recapture when — and who knows when — that market opportunity presents itself.“
— Tom Piercy, chief growth officer at Incenter Capital Advisors
[Editor’s Note: Year to date, Incenter has announced auctions for some $15 billion in new bulk MSR deals, which does not include privately negotiated deals.]
“I don’t know if this is the peak or if … rates are going to continue to go up from here, and MSR values are going follow suit or not. But I think people are of the mindset that it’s now higher for longer [on rates].
“It’s hard because of low [housing] inventory levels and higher interest rates to bring in new originations, but that’s the reason why so many of these servicers keep going back to the same well, with a focus on offering cash-out refinance [or closed-end second liens, or home equity lines of credit] to existing customers, given that can be a source of some volume.
“It’s been a strong [MSR] market [so far this year], with some really attractive execution levels that are, dare I say, being influenced by one’s ability to recapture these borrowers. … It’s hard to convince a borrower with a 3% note rate to cash-out refinance into a 7% note rate, but they can still tap their equity by taking out a HELOC or closed-end second without impacting the rate on their first lien.
“I’ve got probably three or four deals I’m currently working on, so [MSR] volume and pricing are strong. We’ve seen some high-5 multiple trades [historically a great deal in this measure of pricing on MSR pools].
“I think [MSR trading volume] this year is going to be on par, if not slightly better, than last year [which would mark the fourth year in a row that the MSR market has recorded trading volume near the $1 trillion level].“
— Mike Carnes, managing director of MSR valuations at Mortgage Industry Advisory Corp. (MIAC)
[Editor’s Note: Year to date, MIAC has announced auctions for some $6.4 billion in new bulk MSR deals, which does not include privately negotiated deals.)
Source: housingwire.com