|
Time
to "Get off the fence?"
Mortgage
Interest Rates Hit a 4-Year High!
This notification, below, has
came in from one of our investors:
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Price Change
04/07/06
Due to market conditions, XXXXX is revising prices
on rates. Pricing will be effective on locks made
after 12:45 PM EST.
Today's price changes:
AT 12:45 PM- PRICING IS .25 WORSE!
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A decrease in loan pricing (yield)
of .25 is approximately equivalent to a rate
increase of about 1/8%, unless there us an
increase in the up-front "points", that
are charged at closing, that is equal to the price
change. Considering that today's rates started out
about 1/8% worse, this is a rate increase of about
1/4%, or a necessitated increase of 1/2 up-front
point, in one day...and the day isn't over yet! In
the past, we have seen as many as 3 adjustments
like this in one day. (Unfortunately, lenders are
quick to raise rates when the market seems to
warrant it, but much slower to lower the rates.)
Remember, first mortgage rates move in the same
direction as "T-Bond" yields. This is
because the huge secondary mortgage market leaders
(Fannie-MAE, Freddie-MAC, etc.), who, ultimately,
fund the majority of first mortgage loans, do so
by issuing their own bonds, in direct competition
with the US Treasury. Thus, when one bond market
sector's prices fall (and yields rise), the other
sectors must follow suit to remain
competitive...and the 10-year Treasury note yield
has hit 4.92 percent, up from 4.90 late Thursday.
That is the highest yield since June 2002, almost
a 4 year high.
Often, bond yields (and interest rates) move in
the same direction of the stock market. Thus, when
stock market prices rise, interest rates are often
seen to increase. Fortunately, this is not always
the case or the gains people get by obtaining
lower interest rates would always be offset by
losses in their IRA's or 401(k)'s that are
invested in the stock market.
Averaged nationally, 30-year, primary,
owner-occupied, fully-documented mortgage rates
are approaching 6.5% with 1/2 point paid up-front.
15 year mortgages are about .4% lower. Limited
documentation loans, and other specialty mortgage
products are higher yet. Within the last 6 years,
average rates have reached levels that were more
than 1.5% lower.
The effect of rising rates will, most likely,
make adjustible rate mortgages attractive. Most
recently, rates were actually higher for
adjustibles, but this will probably change rapidly
if the rising rate trend continues. It is anyon'es
guess what the future will bring, but it is very
likely that rates will continue to increase for at
least another 6-12 months, with increases equal to
another .5%.
Olen Soifer, Branch Manager
Family Home Lending Corp.
609-646-6644
609-646-6525 (Fax)
News,
from Reuters:
NEW YORK (Reuters, 4-5-2006) - Mortgage
applications rose for a second consecutive week,
reflecting a rush by consumers to lock in loans as
interest rates rose to a near four-year high, an
industry trade group said Wednesday. The Mortgage
Bankers Association said its seasonally adjusted
index of
mortgage application activity for the week ended
March 31 increased 7.2% to 612.8.
"When rates make a sudden upward move,
anybody that was on the fence about refinancing
jumps off and gets in the game quick. But now
we're seeing that on the purchase side as
refinancing activity continues to wane," said
Greg McBride, senior financial analyst at BankRate
in North Palm Beach, Fl.
Loan activity grew along with borrowing costs.
Thirty-year fixed-rate mortgages, excluding fees,
averaged 6.49%, up 0.13 percentage point from the
prior week, a peak not reached since 6.53% in the
the week ended June 14, 2002.
This type of loan rush is likely to be
short-lived, analysts say.
"The market is going to slow from the
frenetic pace of the past few years," said
McBride. "But with fixed mortgage rates
remaining below 7%, and
expected to (remain there) for the balance of
2006, the purchase market will still be very
healthy relative to historical levels."
The 30-year fixed-rate mortgage, the industry
benchmark, was more than 1 percentage point above
its 2005 low of 5.47% of June last year. The
rate's 2005 high was 6.33%, reached in November.
The MBA's seasonally adjusted purchase mortgage
index - widely considered a timely gauge of home
sales - rose to 438.2, up from the previous week's
404.1 but below its year-ago level of 446.0.
Meanwhile, the group's seasonally adjusted index
of refinancing applications increased 5.3% to
1,640.8, its first gain in four weeks. A year
earlier the index stood at 1,798.8.
The refinance share of mortgage activity
decreased to 36.6% of total applications from
37.3% the previous week. It was the lowest
refinance share
since the week ended July 30, 2004, when it
reached 35.8%.
Dallas Federal Reserve Bank President Richard
Fisher said Tuesday that strong consumer and
business spending should ensure the economy does
not get derailed by a slowing housing sector.
"There is a slowdown, apparently, and there
are factors that could or would contribute to
relative weakness, relative to what we have
recently seen, but we have a complicated
economy," Fisher told reporters after
speaking at Midwestern State University.
Historically low mortgage rates have fueled a
five-year housing boom, helping support the U.S.
economy's recovery from recession despite
uncertain
business investment.
Analysts differ on whether a housing bubble
exists, but most agree that the market is cooling
from its record run.
Fixed 15-year mortgage rates averaged 6.15%, up
from 6.00% the previous week. Rates on one-year
adjustable-rate mortgages (ARMs) increased to
5.96% from 5.83%. The ARM share of activity fell
to 28.5% of total applications from 28.8% the
previous week. ARM demand reached a 2005 high of
36.6% in late March of last year.
The MBA's survey covers about 50% of all retail
residential mortgage originations. Respondents
include mortgage bankers, commercial banks and
thrifts.
Copyright 2006 Reuters Limited.
4-5-2006 |
