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Mortgage rates continue to seesaw

Syria pushes investors toward US debt

Balance

Fixed mortgage rates moved lower this past week, as the uncertain fate of the Federal Reserve’s bond-buying program and the possibility of military intervention in Syria drove market uncertainty.

The 30-year, fixed-rated mortgage came in at 4.51%, down from 4.58% last week and up from 3.59% last year, Freddie Mac reported in its Primary Mortgage Market Survey.

The 15-year, FRM decreased to 3.54%, down from 3.60% last week and a steep rebound from 2.86% last year.

Meanwhile, the 5-year Treasury-index adjustable-rate mortgage averaged 3.24%, up from 3.21% last week, and an increase from 2.78% a year ago.

Additionally, the 1-year Treasury-index ARM rose to 2.64%, up from 2.67%, and an increase from 2.63% a year earlier.

"The Fed is monitoring the housing market closely after the run up in mortgage rates over the past few months," said Freddie Mac vice president and chief economist Frank Nothaft.

He added, "The 13.4% drop in new home sales in July led financial markets to speculate whether the Fed might delay reducing its bond purchases and allowed long-term bond yields and fixed mortgage rates to decline over the week."

While mortgage rates have moved substantially higher on concerns of the central bank beginning to taper its monetary stimulus this fall, events in Syria have actually caused rates to go lower, with foreign money reacting on nerves and turning to U.S.-based investments, Bankrate senior financial analyst Greg McBride pointed out.

"Any time that investors are nervous they gravitate toward the safe haven of U.S. government debt," McBride explained.

On a similar note, an institutional lender — a bank that lends to other organizations that is regulated by law — told HousingWire the impact on Syria has affected the stock market and, consequently, left an impression on mortgage rates.

"We had a lot of fluctuation. If you locked a deal Thursday you gained 80 bps, if yesterday it was down 30 bps. Today, down again. We are seeing a lot of movement in rates. We know it can't stay low forever, but man, it [stinks] right now," the company said.

Bankrate data also shows mortgage rates reaching lower levels.

Bankrate’s 30-year, FRM dropped to 4.62% from 4.74% a week earlier.

In addition, the 15-year, FRM decreased to 3.66%, down from 3.75%, while the 5/1 ARM declined to 3.61% from 3.69%.

However, according to the Federal Housing Finance Agency, mortgage rates soared to higher levels in July, with the contract mortgage interest rate rising by 0.45% to 3.55%.

Additionally, the average interest rate on a conventional, 30-year, fixed-rate mortgage of $417,000 or less hit 4.27% in July, the FHFA reported.

The average loan amount in the latest FHFA report was $278,200 in July, down from $282,400 in June.

Overall, mortgage rates are only up 0.75% from the absolute lows, and given how much home prices have fallen in recent years, accompanied by how much rents has increased, home affordability is still high, explained Quicken Loan chief economist Bob Walters.

"The housing market would be fine if mortgage rates were to rise a percentage point or so," Walters stated.

He concluded, "If rates increased much beyond that, especially if they did so quickly, there would be a significant effect on the demand for housing. I don’t think we’ll see those kinds of rate increases in the next year or so however."

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