Posts Tagged ‘low interest rates’

Mortgage Market News Roundup, Week of Nov. 4

Friday, November 4th, 2011

Home loansThe saga of the euro zone bailout resembled an old “Perils of Pauline” movie this week as fear and relief traded places regularly. First, investors worried that the euro zone member nations would be unable to reach a deal to avert a Greek default and stabilize the euro. Then, after a deal was announced to general relief, Greece’s prime minister announnced he would put the matter up to a popular vote, sending the markets back into a tizzy. Now, the referendum has been called off and markets are breathing another sigh of relief. The net result, however, was good news for those in the market for real estate in Philadelphia and elsewhere.

That’s because the turmoil caused investors to pour money into U.S. debt securities, causing mortgage interest rates to plummet, except on the Mortgage Bankers Association’s Weekly Mortgage Applications Survey, which is a trailing survey that measures activity in the calendar week preceding its release. On the two current-week surveys, the drop was pronounced.

Here are the national average mortgage rates on this week’s weekly surveys. Unless otherwise noted, rates are for 80% loan-to-value ratio mortgages and assume good credit.

Mortgage Bankers Association – Weekly Mortgage Applications Survey, week ending Oct. 28

30-year fixed-rate conforming loan: 4.31%, -2 points, with 0.49 points, +0.02 point

30-year fixed-rate jumbo loan: 4.69%, +1 point, with 0.45 points, +0.03 point

30-year fixed-rate FHA-guaranteed loan: 4.09%, -2 points, with 0.51 points, -0.1 point

15-year fixed-rate loan: 3.63%, +1 point, with 0.45 points, unchanged

5/1 adjustable-rate loan: 3.09%, -2 points, with 0.5 points, unchanged Week ending Nov. 2

30-year fixed-rate loan: 4.23%, -10 points

15-year fixed-rate loan: 3.48%, -9 points

5-year ARM: 3.18%, -4 points

Loans this week averaged 0.38 points.

Freddie Mac: Primary Mortgage Market Survey®, week ending Nov. 3

30-year fixed-rate loan: 4%, -10 points, with 0.7 points

15-year fixed-rate loan: 3.31%, -7 points, with 0.7 points

5-year ARM: 2.96%, -12 points, with 0.6 points

1-year ARM: 2.88%, -2 points, with 0.6 points

One basis point equals one hundredth of one percent. One discount point represents one percent of the total value of the mortgage, paid as interest up front.

Mortgage applications rose slightly in the previous week, according to the Mortgage Bankers Association survey, with new purchase loan applications accounting for all of the total rise. Refinance applications fell, losing overall market share for the fourth week in a row. With rates headed back down, this trend could reverse in next week’s report, but at present, it indicates that buyers who can qualify for loans remain interested in homes on the market and are ready to take advantage of very attractive interest rates.


The Velocity of Money

Monday, August 23rd, 2010
Velocity of MoneyAccording to the most recent Commerce Department report, Personal Spending and Personal Incomes were unimproved from the previous month, and the Savings Rate increased as consumers cut back on spending. While that data sheds light on the slow economic recovery, it also has implications on home loan rates.

Here’s why…

It has to do with something called the velocity of money. Even though the government keeps pumping money into the system, nothing happens until that money is spent or lent, and passes from one hand to another or one business to another. The speed at which this money passes between parties is called the velocity of money.

With the job market still very sluggish, consumers aren’t spending much money these days…and businesses are still reluctant to spend moneymaking investments in their business. With the present velocity at low levels, inflation remains subdued and that’s good for home loan rates. That’s because rates are tied to Mortgage Bonds and inflation is the archenemy of Bonds, so low inflation is good for Bonds and rates. However, once velocity increases, the excess money in the system will cause inflation –which is bad for rates, since even the slightest scent of inflation can cause home loan rates to worsen. Buying a home

While we certainly want to see better economic recovery news in the near future, we have to remember that there’s an inverse relationship between good economic news and Bonds and home loan rates. Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. Strong economic news, on the other hand, normally has the opposite result. Currently, home loan rates are at a historically low level, which makes now an ideal time to purchase a home or refinance before the velocity of money –and rates –change.

To summarize, rates are as low as they will ever be; prices are stagnant and will rise as the economy recovers.



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