Uncommon Knowledge
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Noah Elrod is now senior vice president and director of Treasury services, set to launch Cornerstone’s new corporate treasury sales and advisory business in Q4 2024. Elrod previously held similar positions at American National Bank & Trust, Independent Financial, and Wells Fargo. Dana Abernathy joined as vice president of loan servicing business development, with a … [Read more…]
Wells Fargo was supposed to be a major beneficiary of higher interest rates, but depositors seeking more bang for their buck and soft loan demand from business customers combined to to pinch profits in the second quarter.
The bank’s stock price fell 6% in mid-afternoon trading Friday, as investors absorbed the disappointing news about how much interest income the megabank is raking in.
High borrowing costs helped lead to “tepid” loan demand from businesses, said CEO Charlie Scharf, putting a lid on how much interest the bank can collect. All the while, the $1.9 trillion-asset company had to shell out more in interest to keep depositors happy, since they can find higher interest rates elsewhere.
The two factors caused Wells Fargo’s net interest income — the difference between its interest revenues and its interest expenses — to fall to just under $12 billion for the first time since the Federal Reserve started raising rates in 2022.
“They’re still having to pay more to their deposit customers,” said Kyle Sanders, senior equity research analyst at Edward Jones. “Until the Fed cuts, that’s going to continue to happen.”
Investors’ negative reaction on Friday grew out of their expectation that Wells Fargo might upgrade its net interest income guidance for the year, Sanders said. The bank’s balance sheet came into the rate hike cycle better positioned for higher rates than some other banks. Its consumer-heavy deposit base fueled hopes that less-savvy customers wouldn’t notice rates were rising.
But like others in the industry, Sanders said Wells has “consistently underestimated” the size of increases in its deposit costs. While rising interest expenses have been a bigger pain for regional banks, megabanks such as Wells and JPMorgan Chase have also felt the pinch in recent months.
While Wells stuck to its forecast that net interest income will drop by 7% to 9% this year, the bank also said that it anticipates the metric will land at the higher end of that range.
Even so, Sanders said the stock-price decline on Friday seems “a little bit overdone.” He and other analysts pointed to strong growth in the company’s revamped credit card business and its fee-driving investment banking business — two areas that CEO Charlie Scharf has built up during his nearly five-year tenure.
Piper Sandler analyst Scott Siefers wrote in a note to clients that the initial pressure on the bank’s stock price Friday may fade “as better fees may overwhelm the higher cost guide.”
Overall, the company’s profits rose to $4.9 billion between April and June, up from $4.6 billion in the first quarter. Higher fee revenues and Scharf’s campaign to trim noninterest expenses — the bank’s employee headcount is down 11,000 compared to last year — helped reduce the drag from lower interest income.
The higher interest expenses were partly due to depositors’ “continued migration into higher-yielding alternatives,” Mike Santomassimo, Wells Fargo’s chief financial officer, told reporters Friday. Rather than keeping their cash in low-paying checking accounts, consumers have shifted toward higher-yielding savings accounts or certificates of deposit.
However, the pace of that migration “has slowed and continues to slow,” Santomassimo said. Interest expenses climbed 3.3% during the quarter, compared with a 5.4% increase in the first quarter and a 12% jump in the fourth quarter of 2023.
One driver of the most recent increase: Wells Fargo bumped up the interest it pays on deposits in customers’ wealth and investment management accounts, a change that will cost the bank $350 million this year.
There was one silver lining to the higher rates the San Francisco-based bank paid on deposits. Wells grew deposits “in every line of business for the first time in a long time,” Santomassimo said. The pricing for corporate deposits is competitive and thus adds to interest expense pressures, he noted.
But the deposits are “going to be very valuable over a long period of time, particularly as rates start to come back down,” Santomassimo said.
Source: nationalmortgagenews.com
“Credit performance during the second quarter was consistent with our expectations,” Wells Fargo CEO Charlie Scharf told analysts. “Consumers have benefited from a strong labor market and wage increases. The performance of our consumer auto portfolio continued to improve, reflecting prior credit tightening actions, and we had net recoveries in our home lending portfolio.”
Citi, the smallest of the three depositories in the mortgage arena, originated $4.3 billion in home loans from April to June, up 39% from the previous quarter but down 4% from the same period in 2023.
Amid higher origination levels, JPMorgan also grew its servicing portfolio in the second quarter, which was not true for Wells Fargo. JPMorgan’s mortgage servicing rights (MSRs) increased to $8.8 billion in Q2 2024, up from $8.6 billion in Q1 2024 and $8.2 billion in Q2 2023.
Meanwhile, Wells Fargo’s MSRs — as measured by the carrying value at the end of the period — declined by 3% quarter over quarter to $7 billion in Q2 2024. The unpaid principal balance (UPB) decreased by 14% compared to the same quarter last year.
Home lending activity brought in $1.3 billion in net revenues for JPMorgan in Q2 2024, up 11% from $1.18 billion in the previous quarter. The bank had $189 million from servicing revenues in Q2 2024, compared to $144 million in the previous quarter.
Jeremy Barnum, JPMorgan’s chief financial officer, told analysts that the performance of home lending revenues was “predominantly driven by higher net interest income.”
Wells Fargo delivered $823 million in revenues related to its home lending business in Q2 2024. The bank said in a statement that home lending was down 3% year over year “on lower net interest income on lower loan balances” and down 5% from the previous quarter “on lower mortgage banking income.”
According to chief financial officer Michael Santomassimo, Wells Fargo’s revenue reduction reflects its focus on simplifying the home lending business and the ongoing decline in the mortgage market. “Since we announced our new strategy at the start of 2023, we have reduced the headcount of home lending by approximately 45%,” he said.
The bank also generated mortgage banking non-interest income of $243 million in Q2 2024, an increase from $230 million in the previous quarter. Its net servicing income declined 2% quarter over quarter but increased 44% year over year to $89 million.
Overall, JPMorgan delivered $18 billion in profits — or $13.1 billion when excluding extraordinary items, such as a multibillion-dollar gain tied to a Visa share exchange — in the second quarter while the economy saw “some progress bringing inflation down,” according to CEO and chairman Jamie Dimon.
“But there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world. Therefore, inflation and interest rates may stay higher than the market expects,” Dimon said in a statement.
Wells Fargo reported $4.9 billion in net income in the second quarter, while Citi delivered $3.2 billion during the period. Citi CEO Jane Fraser said the bank has made “an incredible amount of progress in simplification — both strategically and organizationally.”
Source: housingwire.com
A veteran of over 11 years at loanDepot, Abarca has held leadership positions of increasing responsibility throughout her tenure. She will be based in the company’s Phoenix-area operations hub. Before loanDepot, she worked with several big banks, including Bank of America, JPMorgan Chase, and Compass Bank. Abarca’s promotion was in line with loanDepot’s Vision 2025 … [Read more…]
The average annual cost for a homeowner to perform maintenance on their single-family property has grown 26% over the past four years, faster than the rate of inflation, a Bankrate study found.
Nationwide, the current average cost for maintaining a typical single-family home is $18,118 per year, the Bankrate Hidden Costs of Homeownership Study reported. Using an average property value of $436,291, it means the buyer is paying $1,510 per month in addition to their mortgage payment in homeownership costs.
Back in 2020, before the pandemic-fueled run-up in home prices, it cost $14,428 annually for maintaining or repairing a typical single-family home, equivalent to $1,202 per month.
The cumulative rate of inflation, as measured by the Consumer Price Index, from 2020 until now is 21.7%.
The report’s calculation assumes that the homeowner pays 2% per year of their home’s average value on these costs.
“While homeownership is worth the financial sacrifice, homeowners also need to be aware of the ongoing expenses that go along with owning property,” said Jeff Ostrowski, Bankrate analyst, in a press release. “After you achieve homeownership, you need to fatten up your emergency savings account for all those surprise repairs.”
Incentivizing homeowners to create emergency savings accounts to deal with unexpected events including job loss helped to reduce mortgage default rates, a 2018 JPMorgan Chase study claimed.
While describing these as the hidden costs of homeownership, some of the items used in the calculation are typical beyond maintenance costs, such as property taxes and homeowners insurance, the T&I portion of the mortgage payment. However, rising costs here have been seen as a stressor on troubled homeowners, a panel at a Mortgage Bankers Association conference noted earlier this year.
Some of these other costs are also common (although not necessarily a part of depending on the agreement) to renting a home, such as electricity, internet and cable television service. Many renters also have an insurance policy to cover their personal property.
In a related Bankrate report that came out at the end of May, while 24% of home purchasers said they put aside money to pay for home repairs and maintenance, 19% have needed to take out additional debt for these costs.
Of that second group, 60% financed through credit cards, one-third took out a personal loan, while 25% obtained a second mortgage (respondents were able to make more than one choice for this question).
There’s also a generational divide among those seeking financing. Gen Z makes up the largest cohort of those having to take out debt, at 31%, followed by 26% of millennial homeowners.
At the other end of the spectrum is Gen X, at 19%, and the baby boomers at 13%.
“There’s no question whether these hidden costs of homeownership, involving plumbing calls, appliance replacement or repair, or getting a new roof or HVAC, will occur,” said Bankrate Senior Economic Analyst Mark Hamrick in a press release. “The key questions involve timing and costs. Planning for the expenses, including through dedicated savings, can help affirm the positive experience of what many consider the American dream, which is homeownership.”
The same generational divide exists among the savers, with the younger groups actually claiming a higher rate, 30% of Gen Z and 25% of millennials, while the baby boomers had 24% and Gen X trailed at 20%.
“By avoiding the elevated cost of borrowing, homeowners can hold onto more of their money, which is almost always a good thing,” Hamrick said.
Source: nationalmortgagenews.com
New York Community Bancorp, the parent of Flagstar Bank, said it’s still committed to the home loan business despite selling approximately $5 billion in warehouse mortgages to JPMorgan Chase Bank to improve its capital and liquidity position.
Following the transaction, Flagstar will exit the mortgage warehouse lending space. However, it will continue financing mortgage servicing rights (MSR). Inside Mortgage Finance (IMF) first reported on the topic and a Flagstar spokesperson confirmed.
On Tuesday, NYCB said it entered into a commitment letter with JPMorgan. The transaction is subject to due diligence, negotiation of definitive terms and other closing conditions. The sale is expected to close in the third quarter of 2024.
“The mortgage business remains an important business for the company and we will continue to provide our mortgage customers and partners the same great service that they have come to expect from Flagstar,” Joseph Otting, NYCB president and CEO, said in a statement.
JPMorgan was the leader in the mortgage warehouse space in the fourth quarter of 2023, with $20 billion in volume and a 20.8% market share, according to IMF estimates.
The bank was followed by Flagstar, with $11.8 billion in volume and a 12.3% market share, the IMF data shows. The top- five is rounded out by Merchants Bank ($6.7 billion; 7%), EverBank ($5.8 billion; 6%) and First Horizon ($5.5 billion; 5.7%).
Loans at mortgage warehouse lending, a source of liquidity to independent mortgage bankers (IMB), have good yields, short terms and are highly secured and collateralized.
But they are not immune to systemic industry shocks, including last year’s bank crisis. Following the tumult, warehouse lenders – such as Dallas-based Comerica Bank – have decided to exit the business.
NYCB, which acquired Flagstar Bank in December 2022, ended up rescuing Signature Bank in March 2023. However, it affected its capital and liquidity structures amid a challenging market condition.
In January 2024, the bank suffered a confidence crisis after reporting a net loss in the last quarter of 2023 due to a provision for loan losses of $552 million, mainly impacted by its exposure to commercial real estate loans.
Fitch and Moody’s downgraded NYCB’s debt ratings on March 1, as the company disclosed internal control deficiencies and a $2.4 billion goodwill impairment. On March 6, the company received $1 billion in equity investment, led by former U.S. Department of Treasury Secretary Steven Mnuchin’s private equity firm, Liberty Strategic Capital.
“Consistent with my guidance during our recent earnings call, we are moving forward quickly to implement our strategic plan, which focuses on improving our capital, liquidity and loan-to-deposit metrics,” Otting said in a statement.
NYCB expects the transaction with JPMorgan to add 65 basis points to its CET1 capital ratio to 10.8% as of March 31. As the proceeds will be reinvested in cash and securities, its share of total assets will improve to 24% from 20% at March 31. Loan-to-deposit ratio is expected to decline to 104% from 110% at the end of the first quarter.
Source: finance.yahoo.com
New York Community Bancorp, the parent of Flagstar Bank, said it’s still committed to the home loan business despite selling approximately $5 billion in warehouse mortgages to JPMorgan Chase Bank to improve its capital and liquidity position.
Following the transaction, Flagstar will exit the mortgage warehouse lending space. However, it will continue financing mortgage servicing rights (MSR). Inside Mortgage Finance (IMF) first reported on the topic and a Flagstar spokesperson confirmed.
On Tuesday, NYCB said it entered into a commitment letter with JPMorgan. The transaction is subject to due diligence, negotiation of definitive terms and other closing conditions. The sale is expected to close in the third quarter of 2024.
“The mortgage business remains an important business for the company and we will continue to provide our mortgage customers and partners the same great service that they have come to expect from Flagstar,” Joseph Otting, NYCB president and CEO, said in a statement.
JPMorgan was the leader in the mortgage warehouse space in the fourth quarter of 2023, with $20 billion in volume and a 20.8% market share, according to IMF estimates.
The bank was followed by Flagstar, with $11.8 billion in volume and a 12.3% market share, the IMF data shows. The top- five is rounded out by Merchants Bank ($6.7 billion; 7%), EverBank ($5.8 billion; 6%) and First Horizon ($5.5 billion; 5.7%).
Loans at mortgage warehouse lending, a source of liquidity to independent mortgage bankers (IMB), have good yields, short terms and are highly secured and collateralized.
But they are not immune to systemic industry shocks, including last year’s bank crisis. Following the tumult, warehouse lenders – such as Dallas-based Comerica Bank – have decided to exit the business.
NYCB, which acquired Flagstar Bank in December 2022, ended up rescuing Signature Bank in March 2023. However, it affected its capital and liquidity structures amid a challenging market condition.
In January 2024, the bank suffered a confidence crisis after reporting a net loss in the last quarter of 2023 due to a provision for loan losses of $552 million, mainly impacted by its exposure to commercial real estate loans.
Fitch and Moody’s downgraded NYCB’s debt ratings on March 1, as the company disclosed internal control deficiencies and a $2.4 billion goodwill impairment. On March 6, the company received $1 billion in equity investment, led by former U.S. Department of Treasury Secretary Steven Mnuchin’s private equity firm, Liberty Strategic Capital.
“Consistent with my guidance during our recent earnings call, we are moving forward quickly to implement our strategic plan, which focuses on improving our capital, liquidity and loan-to-deposit metrics,” Otting said in a statement.
NYCB expects the transaction with JPMorgan to add 65 basis points to its CET1 capital ratio to 10.8% as of March 31. As the proceeds will be reinvested in cash and securities, its share of total assets will improve to 24% from 20% at March 31. Loan-to-deposit ratio is expected to decline to 104% from 110% at the end of the first quarter.
Source: housingwire.com
Andrew Harrer/Bloomberg
(Bloomberg) –As delinquencies on multifamily mortgages pile up, lenders who had bundled those borrowings into securitizations known as commercial real estate collateralized loan obligations are racing to stave off trouble.
To keep the share of bad loans from spiking too high — a development that would cut the issuers off from the fees they collect on the CRE CLOs — they’ve been furiously buying them back. The lenders acquired $520 million of delinquent credit in the first quarter, a 210% increase on the same period last year, according to estimates by JPMorgan Chase.
It’s the latest sign of strain among the $79 billion of loans packaged into CRE CLOs, a market which grew in prominence in recent years as Wall Street financed syndicators who bought up apartment complexes with the intention of renovating them and boosting rents. When interest rates surged, many borrowers whose floating-rate loans were bundled into the securitizations were caught off guard and began falling behind on their payments.
To buy the defaulted loans, some lenders have been borrowing the money from banks and other third parties using what are known as warehouse lines, a type of revolving credit facility. It’s surprising they haven’t had more trouble accessing that debt given how quickly loans seemed to be deteriorating in quality heading into this year, said JPMorgan strategist Chong Sin.
“The reason these managers are engaged in buyouts is to limit delinquencies,” he said. “The wild card here is, how long will financing costs remain low enough for them to do that?”
One reason they have is that risk premiums, or spreads, on commercial real estate loans have tightened materially since last November. As a result, even with a more hawkish tone on the path of rates, the all-in cost of financing is still lower than where it was late last year. Still, there’s no guarantee it will remain that way.
“If the outlook for the Fed shifts materially to hikes or no rate cuts for a while, that might lead to a sharp increase in delinquencies, which can stifle issuers’ ability to buy out loans,” said Anuj Jain, a strategist at Barclays Plc, who expects buyouts to continue as distress increases in the sector.
CRE CLO issuance surged to $45 billion in 2021, a 137% increase from two years earlier, when buyers of apartment blocks sought to profit from the wave of workers moving to the Sun Belt from big cities. Three-year loans would give them time to complete upgrades and refinance, the thinking went.
Fast forward to today and the debt underpinning many of the bonds is coming due for repayment at a time when there’s less appetite for real estate lending, insurance costs have skyrocketed and monetary policy remains tight. Hedges against borrowing cost increases are also expiring and cost significantly more to purchase now.
Those blows helped increase multifamily assets classed as distressed to almost $10 billion at the end of March, a 33% rise since the end of September, according to data compiled by MSCI Real Assets.
“There was so much capital flowing into that space to real estate operators and developers, and that led to a lot of reckless lending,” said Vik Uppal, chief executive officer at commercial real estate lender Mavik Capital Management., who avoided the space.
The pain is now filtering through to the CRE CLO market. The distress rate for loans that were bundled into these bonds rose past 10% at the end of March, according to CRED iQ, compared with 1.7% in July last year.
The firm defines distress as any loan that’s been moved to a special servicer or is 30 days or more delinquent. Some other data providers prefer to wait until payments are 60 days or more overdue before using that classification.
The outlook for the sector has caused short sellers, who borrow stock and sell it with the intention of buying it back at a lower price, to target lenders who used CRE CLOs. That’s because the issuers own the equity portion of the securities, so take the first losses when loans sour.
Short interest in Arbor Realty Trust stood above 37% on Monday, the highest level on record, according to data compiled by S&P Global Market Intelligence.
“The multifamily CRE CLO market was not prepared for rate volatility,” said Fraser Perring, the founder of Viceroy Research, which is betting against Arbor. “The result is significant distress.”
Arbor Realty declined to comment. Reached by phone on Tuesday, billionaire Leon Cooperman said that Arbor founder Ivan Kaufman has been “a good steward of my capital” and had correctly seen the need to position the company defensively more than a year ago.
CRE CLOs appealed to some investors because the issuers tend to have more skin in the game than issuers of commercial mortgage-backed securities. Critics argue the products contain loans of lower quality than you’d find in a CMBS, where loans are typically fixed rate so are, in theory at least, less exposed to interest rate hikes.
“These vehicles are a way for borrowers that need speculative financing that they often can’t get from elsewhere,” said Andrew Park, an analyst at nonprofit group Americans for Financial Reform. “CRE CLOs package the reject loans from CMBS.”
Source: nationalmortgagenews.com
The recent rise of the average long-term U.S. mortgage rate, which poses a new obstacle to aspiring homeowners hoping to purchase a property during this homebuying season, could have dramatic consequences on the country’s housing market.
The national weekly average for 30-year mortgages, the most popular in the nation, was 6.88 percent as of April 11, according to data from the Federal Home Loan Mortgage Corp., better known as Freddie Mac. That was 0.06 of a percentage point higher than a week before and up 0.61 compared to a year before. The national average for 15-year mortgages was 6.16 percent, up 0.1 of a percentage point compared to the previous week and 0.62 compared to a year before.
Read more: How to Get a Mortgage
On Monday, experts monitoring mortgage rates on a daily basis noted that the national average for 30-year fixed mortgages reached 7.44 percent—the highest they’ve been so far this year and close to the 23-year weekly record of 7.79 percent reached on October 25, 2023. On Monday, the 15-year mortgage rate was 6.85 percent. At its peak on October 25, 2023, it had reached 7.03 percent.
“Big one-day jump,” commented journalist Lance Lambert on X, formerly known as Twitter. “The average 30-year fixed mortgage rate ticks up to 7.44 percent. New high for 2024.”
The rise in mortgage rates comes as homebuying season, a time when the number of homes listed for sale increases, is heating up. This climb in inventory starts in spring and normally peaks in summer before declining as the weather gets colder, marking one of the busiest times of the year for home sales. But higher mortgage rates could have an early chilling effect on the market.
Read more: Compare Top Mortgage Lenders
The median monthly U.S. housing payment hit an all-time high of $2,747 during the four weeks ending April 7, up 11 percent from a year earlier, according to a report from real estate brokerage Redfin last week. It noted that the average 30-year fixed mortgage rate, then at 6.82 percent, was more than double pandemic-era lows.
There’s not much hope that mortgage rates will come down soon, as the U.S. Labor Department said last week that inflation has risen faster than expected last month, at 3.5 percent over the 12 months to March. That was up from 3.2 percent in February.
“For homebuyers, the latest CPI [consumer price index] report means mortgage rates will stay higher for longer because it makes the Fed unlikely to cut interest rates in the next few months,” said Redfin Economic Research Lead Chen Zhao. “Housing costs are likely to continue going up for the near future, but persistently high mortgage rates and rising supply could cool home-price growth by the end of the year, taking some pressure off costs.”
Jamie Dimon, CEO of JPMorgan Chase, voiced concern last week over “persistent inflationary pressures” and said the bank was prepared for “a very broad range of interest rates, from 2 percent to 8 percent or even more, with equally wide-ranging economic outcomes.”
While the jump in mortgage rates appears modest, it makes a huge difference for borrowers, who might end up paying hundreds of dollars a month more on top of what’s already one of the most significant expenses in their lives.
Many might decide that they can’t afford to buy a home—which is what happened when mortgage rates suddenly skyrocketed between late 2022 and early 2023 as a result of the Federal Reserve’s aggressive interest rate-hiking campaign.
Between late summer 2022 and spring 2023, a drop in demand caused by the unaffordability of buying a home led to a modest price correction of the housing market. But prices have since climbed back due to the combination of pent-up demand and historic low inventory.
While the Federal Reserve doesn’t directly set mortgage rates, these are hugely influenced by the central bank’s decision to hike or cut interest rates. The Fed left rates unchanged in March and is considered unlikely to cut them this month considering the latest data on inflation.
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
Average mortgage rates edged higher yesterday. It was a modest increase by any standards but tiny by comparison with Wednesday’s big jump.
First thing, it was looking as if mortgage rates today could fall. But that could change later in the day.
Find your lowest rate. Start here
Our table is having technical problems. But we’re working hard to fix them.
Program | Mortgage Rate | APR* | Change |
---|---|---|---|
30-year fixed VA | 7.222% | 7.262% | +0.05 |
Conventional 20-year fixed | 7.007% | 7.058% | +0.07 |
Conventional 10-year fixed | 6.51% | 6.584% | +0.09 |
Conventional 30-year fixed | 7.127% | 7.173% | +0.07 |
30-year fixed FHA | 7.056% | 7.1% | +0.09 |
Conventional 15-year fixed | 6.64% | 6.713% | +0.1 |
5/1 ARM Conventional | 6.785% | 7.888% | +0.08 |
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here. |
Markets have turned gloomy over the prospects of the Federal Reserve cutting general interest rates over the next few months. And that’s been pushing mortgage rates higher.
So, for now, my personal rate lock recommendations remain:
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to decrease. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Find your lowest rate. Start here
Two economic reports are scheduled for this morning.
The March import price index (IPI) landed at 8:30 a.m. Eastern. And that would normally be bad for mortgage rates. Markets had been expecting it to hold steady at 0.3% and it came in at 0.4%.
So, how come mortgage rates were falling first thing? Well, it’s too early to be sure. But those rates often move in the opposite direction after a sharp movement one way or the other. That’s simply markets reflecting on the change and deciding they over-reacted.
This morning’s other report isn’t due until 10 a.m. Eastern. And that means I won’t have time before my deadline to assess its likely impact on markets. They were expecting the preliminary consumer sentiment index for April to improve slightly to 79.9% from 79.4%.
A lower figure may help mortgage rates to fall while a higher one could push them upward. But this is one of those reports that rarely move those rates far unless they contain shockingly good or bad data.
Mortgage rates might also be affected by earnings reports later from three of the biggest U.S. banks, JPMorgan Chase, Wells Fargo and Citigroup. If they all tell a really positive story, stock market reactions could spill over into the bond market that largely determines mortgage rates.
We’ve had April’s two most important reports over the last six days. And, taken together, they were pretty bad for mortgage rates.
Next week’s reports aren’t typically as influential by a long way. But a couple of them (retail sales and industrial production) could move mortgage rates higher if they feed markets’ current pessimism over Fed rate cuts — or push them downward if they contradict it.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Apr. 11 report put that same weekly average at 6.88%, up from the previous week’s 6.82%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Mar. 19 and the MBA’s on Mar. 22.
Forecaster | Q1/24 | Q2/24 | Q3/24 | Q4/24 |
Fannie Mae | 6.7% | 6.7% | 6.6% | 6.4% |
MBA | 6.8% | 6.6% | 6.3% | 6.1% |
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Here are some things you need to know:
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
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Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
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Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
So, for the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
Nowadays, mortgage programs don’t require the conventional 20 percent down.
Indeed, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
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No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account as evidence of their financial circumstances. This is an option for self-employed or seasonally-employed borrowers.
These are mortgages that lenders don’t sell on the secondary mortgage market. And this gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements or offer low-down-payment options without mortgage insurance.
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders. And it could save you thousands in the long run.
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Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
Source: themortgagereports.com