During the second day of testimony to the House Financial Services Committee, Federal Reserve Chairman Ben Bernanke defended the Fed's low interest rate policies as providing crucial support to a still weak economy that continues to be burdened by high unemployment. Stable mortgage rates have continued with Fed's support with the purchase of $85 million per month in Treasuries and mortgage bonds. This action has kept borrowing costs low which has, in turn, helped strengthen industries such as housing and autos.
Bernanke acknowledged the risks involved, but also stated that the Fed's decision is focused at the average American citizen and main street. In addition, Janet Yellon, the Federal Reserve's vice chair, showed her support for the Fed's bond purchases since the economy is operating well below its full potential. According to these statements, bond buying should continue well into the recovery and until there is a substantial improvement in the jobs market. The impact of this should be continued low mortgage rates.
According to the most recent survey of wholesale and direct lenders done by FreeRateUpdate.com, conforming 30 year fixed rates remain as low as 3.250%, 15 year fixed mortgage rates are as low as 2.375% and 5/1 adjustable mortgage rates are as low as 2.375%. Borrowers must have a history of good credit in order to obtain low mortgage rates available for home purchase loans and mortgage refinances.
Housing data indicates that the recovery continues to gain momentum. The Commerce Department reported today that new home sales surged in January to the highest level in 4 1/2 years. Sales of new single family homes were up 15.6% to a seasonally adjusted 437,000 annual rate which is the highest since July 2008 and was the largest gain since April 1993 and up 28.9% from January 2012. The S&P/Case Shiller composite index of 20 metropolitan areas showed that home prices increased 6.8% last year from 2011 numbers which was the largest gain in more than six years. The index increased 0.9% in December on a seasonally adjusted basis.
Home prices have been increasing as inventory has become tighter. Many homeowners are gaining back equity in their property, especially those who have chosen to refinance to lower rates. The HARP program, which is available until the end of 2013 for homeowners who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009, continues to make refinancing possible for underwater borrowers. Homeowners who have already obtained HARP loans will also benefit from increasing home prices, especially if refinances were for shorter terms which gain equity back at a quicker pace.
Remaining the same, FHA 30 year fixed mortgage interest rates are as low as 3.250% and FHA 5/1 adjustable mortgage rates are as low as 2.250%. Increasing .250%, FHA 15 year fixed mortgage rates are now as low as 3.000%. While FHA costs are increasing on April 1st, the low down payment requirement of 3.5% for most borrowers is still available.
Many home buyers can use housing grants or loans, as well as, approved gifts in order to bring down the FHA expenses associated with the first time home purchase. FHA closing costs (APR) are high due to the upfront mortgage insurance premium and other FHA fees, but FHA still allows seller concessions to be used. Existing FHA mortgage holders, including those who are underwater, can use the FHA streamline refinance to move to lower mortgage rates or shorter term loans.
The streamline program does not require an appraisal, a credit history or any other documentation provided there is no cash taken out. Homeowners who have loans that were FHA endorsed prior to June 1, 2009 can use the streamline and will receive drastically reduced upfront and annual mortgage insurance premiums as an incentive to refinance.
Current jumbo 30 year fixed mortgage rates are as low as 3.375% and jumbo 15 year fixed mortgage rates are as low as 2.700%. Decreasing by .250%, jumbo 5/1 adjustable mortgage rates are now as low as 2.125%. Low jumbo interest rates are available for borrowers who have excellent credit, as well as, the qualifications that are required by lenders. Since jumbo mortgages are usually held within a lender's portfolio, guidelines differ and jumbo rates can be competitive.
The jumbo loan market has been on the increase with more lenders offering these loans and more borrowers seeking them. The increase in the FHA mortgage insurance premium, as well as the elimination of the FHA MIP cancellation policy, may bring a high number of borrowers back into the jumbo loan market.
MBS prices affect mortgage rates which move in the opposite direction. Often, economic data will move MBS prices. Durable Orders declined 5.2% which was weaker than expected. Fourth quarter 2012 GDP was revised higher to 0.1% from -0.1%. Jobless Claims for the week ending February 23rd decreased to 344,000 which was below expectations of 360,000. January Personal Income fell 3.6% and was more than expectations. Construction spending dropped 2.1% in January which was the first decrease since last March and below expectations of a 0.7% gain.
The Conference Board's index of consumer confidence jumped in February to 69.6, up from a revised 58.4 in January. This was the biggest gain since November 2011 and the first improvement in four months. The Commerce Department reported that consumer spending increased 0.2% in January, up from an 0.1% rise in December. At the same time, the personal savings rate was down from 6.4% in December to 2.4% in January. Consumer spending and residential construction are major factors of economic activity and growth.
FreeRateUpdate.com
Published: March 6, 2013
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