Interest rates down to 3.51% on 30 year fixed mortgage
The interest rate environment continues to amaze and with the Fed’s recent announcement of their new QE3 program one has to wonder just where rates may go from here. One year ago rates hit 4.0% for the first time and everyone was scrambling to re-finance and here we are a full half point lower. Tighter lending standards along with shrinking inventory levels have pushed demand for new loans lower.
The recently announced QE3 program will have the Fed purchasing 40 billion dollars of mortgage backed securities each and every month with no ending date detailed. It is at this point a never ending program designed to reduce yields but also could have the unwanted effect of increasing the threat of inflation and higher prices at the grocery store and gas pump where everyone is feeling the pinch. But with tightening lending standards those who qualify for these falling rates are also decreasing. To prove that point loans approved these days show credit scores on average about 40 points higher than loans approved back in 2006 when anyone could get money.
As of Sunday, the average overnight rate for a fixed 30-year mortgage as reported by Bankrate.com was at 3.51% down another 2 basis points from where we stood the previous week and another all time record low. While this was the 5th straight week of declines in loan rates the last 4 weeks the largest decline was 2 basis points. The benchmark 15 year fixed rate was at 2.87% down 7 basis points from the previous weeks level while the benchmark 5/1 adjustable rate mortgage declined 2 basis points to 2.91% from 2.93%.
So with the impact of mortgage rates not as important, a new fed program designed to lower them further may not hold much of a punch except for those ready again to re-finance and it is not unusual to see borrowers who have re-financed multiple times in relatively short time periods. Both Fannie Mae and Freddie Mac are taking steps to limit their risk with more stringent requirements and this is one of the main reasons that banks have tightened their lending standards. New guidance will be provided by Fannie and Freddie with hopes that a clearer definition of their acceptable standards will loosen some of the banks requirements and make it easier for some borrowers to obtain financing.
The balancing act continues for lenders as they strive to not put themselves in jeopardy by being forced to repurchase non-performing loans and they have had to do so with billions of dollars of non-performing loans over the past few years.
Local real estate sales in Palm Beach County have held up well and there are still more buyers that suitable properties so let’s hope that trend continues.
Interest rates continue to slide
Nobody can say being involved in southern Florida real estate isn’t fun. We have had an amazing year to date with strong sales and shrinking inventories much of the demand fueled by interest rates that seem to defy logic. While weakness in the overall economy drives rates further down one has to wonder just how low they can go and what impact this will have the future of the real estate market.
As of Sunday, the average overnight rate for a fixed 30-year mortgage as reported by Bankrate.com was at 3.55% down another 7 basis points from where we stood the previous week and another all time record low. The benchmark 15 year fixed rate was at 2.96% also down 7 basis points from the previous weeks level while the benchmark 5/1 adjustable rate mortgage again without much logic jumped and amazing 21 basis points to 2.99% from 2.78%. Why the 5/1 ARM would buck the trend in such a huge fashion also defies logic.
Not that there is logic to any of it but those who can qualify for loans as underwriting criteria gets tougher and are able to park themselves in a home for a long time with a fixed rate at these levels should be happy campers. We have been saying this for a long, long time and I see people who have re-financed their loans 3 times over the past couple years. Nowadays “old” record rates of 4.5% we first saw about a year ago seem to be off the chart high. In fact, this update we lengthened the time span of the chart above back a little over two years ago when we first breached the 5% level.
So where do we go from here? Anybody watching the bond market and especially in countries like Switzerland where talk of “negative” bod yields are getting louder and one wonders is this a scenario that may play itself out in the good old United States. We live in interesting times and I wouldn’t bet against anything these days. Keep your eyes and ears open as rates in fact could be going lower.
Local real estate sales seemed to have hit the brakes over the past two weeks and we will dig in to those metrics in our upcoming articles............
Interest Rates Hit Yet Again Another All Time Record Low
Interest rates continue to head lower which is great news for homebuyers and those who have not yet taken advantage of these once in a lifetime rates in a re-financing situation. However, the reasons for the downward pressure, slowing economic growth and worries about the future, are certainly not good news for the continued recovery of the real estate markets here in South Florid and elsewhere around the country.
As of yesterday morning, the average overnight rate for a fixed 30-year mortgage as reported by Bankrate.com was at 3.8% down 2 basis points from where we stood one week ago today. The benchmark 15 year fixed rate is at 3.04% down 2 basis points from last weeks level while the benchmark 5/1 adjustable rate mortgage remained unchanged at 2.71%.
Interest from investors in property in the area continues to gather steam and the number of bids and prices realized on new listings continue to amaze. Those with cash looking for what they consider a more solid, and safer, return that they can get elsewhere are snapping up everything that is thrown at them. Many are counting on inflation heading our way and real estate in the end will be a beneficiary to higher prices throughout the economy. Time will tell.
Treasury yields, especially on the 10 year bond which ois most closely tied to interest rates continue to ease bringing this continued downward pressure on mortgage rates. Last week marked the 4th straight week of declines bringing the rates on a 30 year fixed mortgage from just over 4% down to teh 3.8% where we stand today. Gross Domestic Product rose at an annualized rate of 2.2% so the good news is there is at least some growth but the numbers are disappointing. Couple this news with the unemployment rate which continues to be problematic and with th election heading our way one would not expect much change in the coming months.
Inventory levels for investment grade properties continue to be anemic........