- After testing their all-time lows in July, rates trended higher during the latter part of the Presidential campaign season then rushed to new 18 month highs immediately following the election.
- Bond investors are increasingly wary (some are convinced) that the DECADES-long trend to lower rates is now over. While confirmation of this is impossible, market psychology is defensive in anticipation of higher rates ahead.
- The Trump administration's stated fiscal policies are a contributor to the upward rate momentum, however, the markets have paused and been relatively stable within a range in the low 4's for the past 10 weeks.
- It is worth noting that rates are below their 2016 high and that despite firm economic reports the Federal Reserve appears hesitant to raise rates pending clarity on the new administration's fiscal policies.
Showing posts with label mortgage rates. Show all posts
Showing posts with label mortgage rates. Show all posts
Mortgage Rate Talking Points 02/2017
The End of Low Rates?
The biggest year-end story in real estate was undoubtedly rising mortgage rates. Rates bottomed in July and rose slowly until the election when they went ballistic with one of the steepest rises we have seen in the past 8 years. Whenever we get an outsized move like that there is a lot of anxiety. Many people are projecting much higher rates this year and an end to the historic 'Low Rate Era' of the past 10 years. While the rise in rates is unsettling it is important to keep things in perspective. The chart below shows the swing lows and highs in mortgage rates since 2009. The recent rise brings us closer to the middle of the 8-year range. With the FED projected to raise rates three times in 2017 an upward bias in mortgage rates is expected, but even so, there is further to go before rates break out of the current multi-year range. Until that happens, rates are still very low with the potential to make lower lows in a future economic slowdown.
The biggest year-end story in real estate was undoubtedly rising mortgage rates. Rates bottomed in July and rose slowly until the election when they went ballistic with one of the steepest rises we have seen in the past 8 years. Whenever we get an outsized move like that there is a lot of anxiety. Many people are projecting much higher rates this year and an end to the historic 'Low Rate Era' of the past 10 years. While the rise in rates is unsettling it is important to keep things in perspective. The chart below shows the swing lows and highs in mortgage rates since 2009. The recent rise brings us closer to the middle of the 8-year range. With the FED projected to raise rates three times in 2017 an upward bias in mortgage rates is expected, but even so, there is further to go before rates break out of the current multi-year range. Until that happens, rates are still very low with the potential to make lower lows in a future economic slowdown.
Where are Rates, Really?
Where do homebuyers get information about mortgage rates and how accurate is it? More than likely from the news media, whether in print, TV, radio or the internet. When we hear about mortgage rates from these sources they are most likely citing the weekly mortgage rate survey published by Freddie Mac each Thursday called the Primary Mortgage Market Survey (PMMS). This survey is a great tool for referencing historical mortgage rates as it goes all the way back to 1971- pretty cool and you can check it out here: http://www.freddiemac.com/pmms/
The PMMS does have a down side, though; it doesn't always keep up with what is happening with rates on a day to day basis. Since the survey data is collected on Monday and Tuesday to be published on Thursday it is often out of whack with the true level of rates. You see, mortgage rates move fluidly just like stock prices. Mortgage rates offered to applicants are a reflection of the most current trading prices of Fannie Mae, Freddie Mac, and Ginnie Mae bonds, which trade on the Chicago Mercantile Exchange (CME) most every business day of the year. So by the time the survey is published rates have already moved on. This chart shows the discrepancy between the Freddie Mac survey and actual daily rates over the past 3 months.
Where do homebuyers get information about mortgage rates and how accurate is it? More than likely from the news media, whether in print, TV, radio or the internet. When we hear about mortgage rates from these sources they are most likely citing the weekly mortgage rate survey published by Freddie Mac each Thursday called the Primary Mortgage Market Survey (PMMS). This survey is a great tool for referencing historical mortgage rates as it goes all the way back to 1971- pretty cool and you can check it out here: http://www.freddiemac.com/pmms/
The PMMS does have a down side, though; it doesn't always keep up with what is happening with rates on a day to day basis. Since the survey data is collected on Monday and Tuesday to be published on Thursday it is often out of whack with the true level of rates. You see, mortgage rates move fluidly just like stock prices. Mortgage rates offered to applicants are a reflection of the most current trading prices of Fannie Mae, Freddie Mac, and Ginnie Mae bonds, which trade on the Chicago Mercantile Exchange (CME) most every business day of the year. So by the time the survey is published rates have already moved on. This chart shows the discrepancy between the Freddie Mac survey and actual daily rates over the past 3 months.
You can see that rarely do rates remain the same by the time the survey is published. In quiet market conditions the survey more closely reflects actual rates, but at other times it can be off by a mile like it was in November and December of this year. This week the survey shows rates at 4.09% when we ended the week closer to 4 1/4.
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