In a break for mortgage rate shoppers nationwide, last week’s mortgage markets improved overall. The unexpected gift may be among the Refinance Boom’s last big breaths.
FHA, Conforming Rates Improve
Despite stronger-than-expected economic data and positive reports from housing, mortgage-backed bonds made small gains which helped to ease conforming, FHA and VA mortgage rates.
The Fannie Mae (FNMA) 3.0% 30-year coupon gained +16/32 last week and Fannie Mae bonds are linked to conforming mortgage rates. As a result, conforming 30-year fixed rate mortgage rates fell between Monday to Friday, as did rates for the conforming 15-year fixed rate loan.
Loan rates on specialized conforming products, too, including the “Obama Refi” and the Conventional 97 low downpayment mortgage.
On the Ginnie Mae (GNMA) side of things, rates improved, too. GNMA bonds are linked to FHA mortgage rates, VA mortgage rates and USDA mortgage rates.
The Ginnie Mae 3.0% 30-day coupon improved, too, adding +21/32. This is a marked improvement as compared to the week prior, and gives FHA-backed homeowners a bit of a break. At the end of this month, FHA mortgage insurance premiums are rising and demand for the flagship FHA Streamline Refinance program has been especially high.
Finally, jumbo mortgages rates idled between Monday and Friday.
Mortgage Rates : Subject To Change
Through the last two weeks, economic data was scarce. Mortgage rates moved as much on momentum as anything else.
For rate shoppers, momentum trading can be represent risk — mortgage price changes often happen quickly and without notice. The 10-day Dow Jones Industrial Average winning streak, for one, threatens to siphon investor dollars from the bond market into equities.
When stocks draw Wall Street’s attention, bonds can lose big, which can force rates up.
This week, though, we’re back to data. The week kicks off with the National Association of Homebuilder (NAHB) confidence survey, and will feature data from the home resale market and home construction market. Furthermore, the Federal Reserve meets for the second time this year.
The weeks’s calendar is as follows :
- Monday : Homebuilder Confidence Survey
- Tuesday : Housing Starts
- Wednesday : Federal Open Market Committee Adjourns; FOMC Forecasts
- Thursday : Existing Home Sales; FHFA Home Price Index
- Friday : None
The big event risk is this week’s FOMC meeting.
Cyprus : Potential “Shock To The System”
There’s another potential threat to this week’s mortgage rates, though — safe haven buying. Well, safe haven buying is not a threat, really. It’s more of a good thing for rate shoppers. “Safe haven buying” is when investors stop seeking risk and start seeking safety of principal.
The U.S. mortgage bond market affords this.
The story’s backdrop is a long-time coming, and it came to a head after Friday’s market close. In short, the Eurozone nation of Cyprus — a nation representing less than 1% of the Eurozone’s overall GDP — moved to impose a tax on all bank deposits.
The move — sometimes called a “bail-in” — is meant to have Cyprus savers share the cost of recapitalizing the nation as opposed to relying on a Eurozone bailout fund such as the European Stability Mechanism (ESM). However, in doing so, finance ministers may be triggering a flight-to-quality assets which benefits U.S. bonds and lowers domestic mortgage rates.
The Cyprus action is still pending but, in the right scenario, U.S. rates may halt their upward trend and begin to reverse downward. This would also fulfill the mortgage rate patterns we’ve seen since 2009.
Rates have tended to rise through March of late, until a shock to the system reverses them lower. The Cyprus action from this week may be that system shock.
Reasons To Lock Your Mortgage Rate
Mortgage rates are well off last year’s lows. Rates are off to their worst start since 1996 and the market appears poised to worsen through the Spring and Summer months.
The economy is getting better. It’s moving rates up.
In December, when rates were closer to 3.3% percent, the Mortgage Bankers Association projected that the 30-year fixed rate mortgage would end the year near 4.4%. We’re one-third there.
If you’re floating a rate, or waiting for a drop, consider changing plans. The rates of today may be the best that rates get.
About the Author
Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage.