August 13th, 2012
Below is an excerpt from our latest Market Trends newsletter, available Friday night in your inbox:
Sometimes, no news is good news. That might be the lesson taken from the markets lately, since there has been little significant good or bad news to cause disruption. Given the upward trend in stock prices and the accompanying rise in some interest rates, perhaps quiet is just what the market needs to calm nerves frazzled by months of varying crises. It’s either that, or perhaps folks have just given up and gone on vacation.
Either way, mortgage rates have lifted slightly off record-low bottoms, and absent any new fiscal tragedy or worsening of an old one, we may not revisit those lows anytime soon. Of course, given the present state of affairs, we’re certain not to wander too far from them, either, and so far, we haven’t.
Mortgage rates barely move
HSH.com’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator (FRMI)–found that the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) rose by two basis points (.02 percent) to 3.88 percent, and all of three basis points above its record low.
The FRMI’s 15-year companion declined by a single basis point, retreating to 3.15 percent, just one tick above a record low.
Important to homebuyers and low-equity-stake refinancers, already-low FHA-backed 30-year mortgages rose by one basis point to 3.45 percent, the series’ first bump in six weeks, while the overall average rate for 5/1 Hybrid ARMs finished the weekly survey at 2.81 percent, just a hundredth of a percentage point above rock bottom.
It’s more about availability as opposed to price
Interest rates for mortgages remain outstanding.
At this stage of the game, and for many potential borrowers, it’s less about the price of mortgage money than the availability of it. With Fannie and Freddie being really the only secondary market game in town, there’s no competition per se, and their underwriting standards remain pretty stiff.
That was largely reflected in the latest survey of Senior Loan Officers conducted by the Federal Reserve, which found that residential lending standards for prime-quality mortgages were unchanged in the second quarter of 2012.
Without the GSEs loosening underwriting requirements, with no private market in which to sell loans, and with regulators peering over shoulders at every turn, lenders have no choice but to adhere to the rigid rules in place if they want to make mortgages. Ironically, mortgages are one of the few places that fee income and profits are coming from these days for banks, while at the same time likely the most significant source of their losses, too.
Mortgage rates vs. Treasury rates
Just as when they were plummeting to new depths, the rise in Treasury rates has had little effect on mortgage rates.
There is much less of a lockstep relationship between the two instruments than at other times over the last 10 to 20 years. Furthermore, with the Federal Reserve manipulating the market, there is no longer a true expression available, regardless.
Mortgage rates to remain low
Mortgage rates are bouncing along bottoms, and are likely to continue to for at least a while yet as there is no discernable direction for the economy, here or abroad. A more robust slate of economic data is due this week, including some housing data, but there’s nothing likely to move rates significantly.
We’d be remiss if we didn’t acknowledge the passing of an old friend of HSH and a true pioneer in personal finance journalism, Grace Weinstein, who left us last week at the age of 76. We’ll miss her wit and professionalism as well as our chance to contribute to her outstanding works. Our thoughts are with her family and friends.